Cryptocurrencies and digital currencies mirror the reality in which we live: a period of mass digitization in which traditional assets (such as storefronts and photo albums) are shifting totally online.
However, when the owners pass away or become incapacitated, what happens to all of this wealth? While digital money and assets make commerce and transactions easier, they have undoubtedly made estate planning more difficult. Writing a will and then having the executor find all of the assets isn’t going to work in the future.
“Life” lesson from Gerald Cotten’s death
Gerald Cotten is an excellent example of what might happen if you depart this world without a strategy in place for transferring your cryptocurrencies to loved ones. Cotten, the CEO of the crypto exchange Quadriga, was 30 years old when he died in India, or faked his own death, depending on who you ask.
Because Cotten had the private keys to $250 million in cryptocurrencies belonging to his clients, he took it with him. While several others looked for a method to get their hands on the monies, Cotten was the only one who could have done so, keeping his investors in the dark.
Well, let’s take a look at some methods to bring “life” to this problem. Pun intended.
Revised Uniform Fiduciary Access to Digital Asset Act (RUFADAA) for cryptocurrency inheritance
The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) defines the laws and regulations governing the ownership of digital accounts. To ensure that your fiduciaries have access to your digital assets, familiarize yourself with the RUFADAA and alter your wills, trusts, and POAs accordingly.
Under RUFADAA, online management systems have precedence over any other type of account instruction. As a result, if you designate a beneficiary on your online account, it will take precedence over account instructions in your will, trust, or power of attorney paperwork.
However, with the new cryptocurrency Executive Order from the Biden Administration, there is yet to be clear cut rules regarding RUFADAA.
Digital Financial Exchange (DIFX) crypto inheritance service
Jeetu Kataria, the CEO of Digital Financial Exchange (DIFX), stressed the need of a mechanism to leave cryptocurrency to loved ones in the event of death in an interview with Cointelegraph. According to Kataria, their organization developed a blockchain-based nomination platform that allows users to name trusted individuals, family, and friends as beneficiaries of their cryptocurrency wallets in the event that the wallet owner passes away.
He stated;
“Crypto is here to stay and having this feature is necessary for securing the digital future. If you are an avid crypto trader like me, I am sure that the thought of who will inherit your crypto has come to mind.”
A blockchain-based approach, according to Kataria, ensures that the authenticity of recipients is verified and not questioned. Kataria argues that the approach is more efficient and secure than handing out private keys and access credentials.
While many traders may like the functionality, those who desire decentralization may not be as enthusiastic. Kataria, on the other hand, believes that centralization is
“key for mass adoption.”
At the present Crypto Expo Dubai, DIFX unveiled the functionality as well as a new corporate brand. The program helps the exchange achieve its goal of becoming more consumer-centric. This, according to Kataria, is a technique for their staff to relieve clients of “pain points” and concerns.