Original Authors: Xu Qian, Li Xinyi

Introduction

In today's world where digital assets are becoming increasingly popular, the inheritance of virtual currencies has gradually become an unavoidable legal and practical issue. When life comes to an end, what will happen to the wealth stored on the blockchain? Are they legally protected, and what challenges will arise during the inheritance process?

This article will explore the legal characterization and practical challenges of virtual currency inheritance from the perspective of lawyers, combining legal provisions and typical cases.

Starting with the Milestone Case from the Madras High Court

In October 2025, the Madras High Court in India made a landmark ruling, stating that cryptocurrency meets the legal definition of "property" and can be owned, transferred, and held in trust. This case originated from the freezing of 3,532 XRP tokens belonging to an investor on the WazirX exchange, and the court ultimately confirmed that these assets should be protected as property. This ruling not only provides a judicial reassurance for India's digital asset market but also marks the gradual formation of the global legal system's understanding of "virtual property." In other words—virtual currency has transformed from "digital game currency" to "property."

In recent years, the legal view of "cryptocurrency as intangible property" has gradually emerged, outlining the evolution of the global legal system's understanding of digital asset attributes and providing a legal foothold for the inheritance of virtual currencies.

Legal Attributes of Virtual Currency

The "property attribute" of virtual currency is being widely accepted by the global judiciary. Although the technical basis of virtual currency is data, its possessability, transferability, and economic value clearly endow it with the core characteristics of property. Because of this attribute, there have been frequent civil and criminal cases involving the ownership, infringement, and fraud of virtual currencies around the world in recent years, forcing legal practice to respond to this new form of property.

This convergence of judicial recognition paves the way for the inheritance of virtual currency. When virtual currency is recognized as property, it naturally falls within the scope of inheritance law.

Under the Chinese legal framework, Article 127 of the Civil Code innovatively states: "Where the law provides for the protection of data and network virtual property, it shall be implemented in accordance with its provisions." This provides a legal basis for the protection of virtual property.

Additionally, Article 1122 of the Civil Code adopts a general legislative model for the definition of inheritance, defining it as "the personal lawful property left by a natural person upon death." This breaks the limitations of the original Inheritance Law, which used a listing legislative approach, greatly expanding the scope of inheritance, making it possible for network virtual property, digital currency, and other new forms of property to be included as objects of inheritance.

On the regulatory level, documents such as the "Notice on Preventing Bitcoin Risks" and the "Announcement on Preventing Risks of Virtual Currency Trading Speculation" emphasize risk prevention but also classify Bitcoin and other virtual currencies as "specific virtual goods." From a legal perspective, this classification of "virtual goods" actually acknowledges their property attributes, providing a logical starting point for the inclusion of virtual currency in the inheritance system.

Practical Dilemmas of Virtual Currency Inheritance

In theory, there are no issues with inheritance; in practice, the problems lie in the details.

Mainstream cryptocurrencies like Bitcoin and Ethereum have enormous market values, leading to many investment portfolios containing considerable virtual wealth, which inevitably involves wealth transfer. Although the judicial practices and general legal provisions of various countries have opened up space for the inheritance of virtual currencies, practical operations still face multiple dilemmas.

1. Proof Challenges: How to Prove Invisible Assets?

Due to the decentralized and anonymous nature of blockchain, there are certain ownership proof barriers for virtual currency assets. Bank accounts have transaction records, real estate has registrations, while the "ownership evidence" of virtual currency lies in the technical layer: private keys, mnemonic phrases, exchange accounts… None of these are traditional legal certificates. Heirs need to provide not traditional ownership certificates but rather electronic data evidence related to the deceased and the virtual currency. However, is this evidence sufficient to prove property ownership, disposal intent, and inheritance qualifications? Additionally, most users did not clearly retain relevant certificates during their lifetime, leading to many digital assets ultimately disappearing in the vast data of the blockchain.

2. Inheritance Mechanism: Can It Operate Smoothly?

The location of virtual currency storage directly determines the difficulty and process of inheritance.

• On exchanges (like Binance, Coinbase): Heirs can contact customer service, submit the deceased's death certificate, will certification documents, identification, etc., and after internal review by the platform, assets can be transferred. However, laws vary by country, and this process can be time-consuming, with risks of platform policy changes or closures. It is unclear whether the platform can transfer assets. Alternatively, heirs may need to know the login password and complete various verifications to transfer assets.
• In wallets, heirs must know the private key or mnemonic phrase; if this string of alphanumeric characters is lost, it is akin to losing the only key to a safe.

3. Technical Barriers: The Dilemma of Private Keys and Security

The core challenge of virtual currency inheritance lies in its technical nature.

In the crypto world, the private key is ownership. Without the private key, any will is merely a piece of paper. If the deceased did not properly inform the heirs of the private key or mnemonic phrase, the corresponding assets may be permanently lost. In 2018, Gerald Cotten, the founder of the Canadian exchange QuadrigaCX, suddenly passed away, and since he was the only one who held the private key to the cold wallet, $147 million in user funds could not be recovered. This case exposed the vulnerability of centralized storage mechanisms in inheritance issues. Additionally, a Chainalysis report indicated that about 20% of Bitcoin is permanently lost due to private key loss or the death of the holder. This represents a costly form of "digital silence."

Even if heirs possess the private key, they must have a certain level of technical proficiency. A single input error or a careless click on a phishing link could cause assets to disappear forever. The inheritance of digital assets has never been so reliant on "technical barriers."

4. Valuation and Division: Legal Challenges from Volatility

The prices of virtual currencies are highly volatile: today's inheritance may lose half its value tomorrow or double. Legally, which point in time should be used as the valuation standard? How to distribute fairly? For wallets containing multiple tokens, division is almost a "technical project." In most cases, liquidating before dividing is a more realistic approach, but this raises new questions: how to complete the liquidation under compliance?

Lawyer's Advice: Asset Planning for Virtual Currency Holders

As lawyers, our advice is—do not leave digital inheritance to fate.

Virtual currency holders should fully recognize the property attributes of virtual currencies and the trend of their legal recognition and protection. Given the uniqueness and complexity of virtual currency inheritance, holders should:

1. Clearly Identify the Existence and Quantity of Virtual Currency Assets

The concealment of virtual assets is the first obstacle to inheritance. If heirs are unaware of the existence of assets, all inheritance planning is in vain. It is recommended that virtual currency owners record the following key information: types of assets (such as Bitcoin, Ethereum, other tokens); clearly identify the storage location of assets (such as centralized exchanges, cold wallets, self-custody hot wallets); record public key addresses; and even record private keys or mnemonic phrases (but it is advised to print or handwrite them on paper, not to store them on computers or other electronic devices); for exchange accounts, record the platform name, registered email/phone number, password, etc.

2. Securely and Encryptedly Store Private Keys, Mnemonic Phrases, and Other Key Data

Hardware wallets are currently a relatively secure storage solution. They isolate private keys in an offline environment, greatly reducing the risk of being attacked online. Private keys/mnemonic phrases are the absolute proof of control over assets, and their security directly equates to the security of the assets. If lost, the assets are permanently lost; if leaked, the assets can be stolen. Backups (such as USB drives or papers recording private keys) should be stored in multiple secure locations, such as safes.

3. Develop a Digital Asset Inheritance Plan or Trust Arrangement

By transferring wallet ownership to a trust, virtual currencies can be included in the trust structure, with designated trustees professionally managing the virtual currencies. Set up a wallet that requires 2-of-3 private keys to access. The three keys can be held by the deceased, the heir, and a lawyer or other trustee. After the inheritance begins, the other two parties can collaborate to transfer assets through verification, achieving a combination of decentralized security and legal oversight.

4. Pay Attention to Trading Platform Policies and Regulatory Changes

If assets are on a third-party trading platform, the stability and compliance of the platform are particularly important, as policy changes or regulatory actions may freeze or even revoke access rights. It is necessary to understand and monitor the platform's operating rules and relevant regulatory policies to respond to potential risks and changes.

In the crypto world, the real risk is often not theft but being forgotten. Only through advance planning can digital wealth continue its value and become a stable legacy.

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