Author: Sukriti Chaudhary, 3rd Year, National University of Study and Research in Law, Ranchi
ABSTRACT:
With the emergence of cryptocurrencies like Bitcoin and Ethereum, the law of succession is confronted with an unusual challenge, treatment of cryptocurrencies as inheritable assets. Being decentralized, pseudonymous, and extremely volatile, cryptocurrencies are different from traditional assets. This article examines whether existing legal systems particularly Indian succession laws are well-suited to address inheritance of cryptocurrencies using their current frameworks. Based on legal rationale, comparative examination, and case citations, this article puts the spotlight on legislative gaps, digital asset loss after death risks, and the imperative for statutory acknowledgment.
TO THE POINT
Cryptocurrencies, although virtual and distributed, have monetary value. Now arises an important question: Can digital assets be inherited in the same manner as movable property under the law of succession?
In India, Section 2(11) of the Indian Succession Act, 1925 provides a definition of “property” as including real and personal estate. As cryptocurrencies hold monetary value and can be transferred, sold, or owned, they technically come under this definition more precisely, under the ambit of movable intangible property. Yet, no clear acknowledgment of cryptocurrencies exists within Indian law of succession, and the estate planning and inheritance of the same stands very much exposed to loss, fraud, or dispute.
USE OF LEGAL JARGON
When it comes to inheriting cryptocurrency, there are some important legal concepts to consider. Succession law outlines two main types: testamentary succession, which is the transfer of property through a valid will, and intestate succession, which happens when someone passes away without a will, leading to a distribution based on statutory rules. Cryptocurrencies, while they don’t have a physical form, hold real monetary value and are classified as movable intangible assets, much like intellectual property rights or digital securities. In this scenario, a person’s cryptocurrency holdings become part of their digital legacy, including not just the assets themselves but also how to access them (think private keys and wallets). After someone dies, their estate goes through probate, a legal process that confirms the will and allows for asset distribution. However, the ambiguity surrounding digital assets can complicate probate when it comes to cryptocurrencies, particularly if the access credentials aren’t well-documented or passed down properly.
THE PROOF
Recent judicial, legislative, and regulatory changes are increasingly acknowledging cryptocurrency as something that can be inherited, even if indirectly In Reserve Bank of India v. Internet and Mobile Association of India [(2020) 10 SCC 274], the Supreme Court struck down the RBI’s 2018 circular that banned banks from engaging with crypto. This ruling affirmed the right to trade and transact in cryptocurrency, reinforcing its status as a legitimate financial asset under Indian law.
Additionally, the Income Tax Department introduced the term “Virtual Digital Asset” in Budget 2022 for tax purposes. While this classification mainly serves fiscal needs, it reflects the government’s growing acceptance of crypto as a valid form of property, which could potentially fall under succession laws. Looking at comparative jurisprudence, we see further support for this view. In In the Estate of Allen (2020), the High Court of New Zealand allowed cryptocurrency to be included in estate distributions, recognizing it as a valuable component of the deceased’s assets. These various authorities and developments, while somewhat fragmented, lay the foundational groundwork for arguing that cryptocurrencies should be recognized as property that can be passed on under succession law.
THE NATURE OF CRYPTOCURRENCY: IS IT PROPERTY?
The main legal question at hand is whether cryptocurrencies like Bitcoin can be classified as “property” under the law. Traditionally, property includes both physical items, like land, and intangible assets, such as shares and intellectual property rights. While cryptocurrencies are intangible and decentralized, they do share some traits with movable intangible property. In India, the Indian Succession Act of 1925, specifically Section 2(11), offers a broad definition of “property” that could potentially cover digital assets. On the international stage, things are a bit clearer. In the case of AA v. Persons Unknown [2019] EWHC 3556 (Comm), the UK High Court recognized Bitcoin as property. Similarly, the IRS in the United States and courts in Singapore have also classified cryptocurrencies as personal property. These rulings bolster the argument that crypto-assets can indeed be passed down through inheritance.
THE PROBLEM OF ANONYMITY AND ACCESS
Even if cryptocurrencies are legally accepted as property, they are technically unavailable without private keys. In contrast to old-fashioned bank accounts or securities in the custody of a central authority, cryptocurrencies do not reside in any central repository. They reside on a blockchain and are only available by means of special cryptographic keys. If the key is misplaced or not disclosed at the time of death, the asset is lost forever—despite the heir having a legal claim upon it.
This creates a practical issue: succession can only occur if access exists. Legal right is irrelevant without technical access. The finality of blockchain transactions worsens this problem. Existing probate processes are not geared to manage such access mechanisms, leaving heirs vulnerable to complete asset loss.
TESTAMENTARY CRYPTO PLANNING
Without statutory protection, planning under will is indispensable. People have to make conscious efforts to bring in cryptocurrencies in their wills. These should preferably carry specific instructions for reaching the digital wallets or appoint a digital executor—a human being whose responsibility it would be to deal with digital assets.
Technological options like multi signature wallets, encrypted backup, and succession-enabled hardware wallets can be integrated into wills. However, there is uncertainty about legal enforceability. Is it a breach of security or privacy standards to include private keys in a will? These ambiguous issues definitely require some legal clarity and a bit of innovative thinking from lawmakers.
THE ROLE OF DIGITAL EXECUTORS AND FIDUCIARY DUTIES
A typical executor would not be able to deal with digital assets, particularly ones that are decentralized. This leaves the necessity for an established legal position of a “digital executor”, an individual with the legal and technological capability to execute digital legacies. Their responsibilities need to be codified protection against confidentiality, safeguarding of assets, and legal distribution. In addition, fiduciary duties will have to be applied to virtual property. For example, mismanagement of private keys, failure to protect passwords, or misuse of virtual holdings may be subject to liability. Trust law would potentially have to adapt to new types of property.
CYBERSECURITY, LEGAL RISK, AND PROBATE COMPLICATIONS
The passing of cryptocurrencies is not merely a legal problem but also a cybersecurity issue. Unlike conventional assets left in banks or registered by the government, cryptocurrencies operate on fully decentralized, frequently pseudonymous networks. This exposes them to risk during probate, the judicial process that authenticates wills and transfers estates. When an estate contains crypto assets, and sensitive access information is revealed in probate reports or via unsecured communication, the risk of hacking, phishing, and cyber fraud increases exponentially.
In addition, heirs themselves typically do not possess the technical knowledge to protect such assets. They can unwittingly reveal wallet credentials or seed phrases, or become victims of scams in the guise of inheritance services. The current probate system under Indian law does not make any provision for safe management of private keys, encrypted backups, or digital authentication mechanisms. Blockchain networks do not have any fallback system in place similar to traditional financial institutions that can revive access to an account even after death. Once a private key is lost or compromised, the access to the cryptocurrency is lost forever.
The law has to then adapt to add provisions for cybersecurity measures for digital inheritance, for example, application of secure e-lockers, multi-factor authentication, blockchain-based execution of wills, and custodians in court approved for the custody of digital credentials. Otherwise, digital wealth remains legally as well as technologically exposed, even as it assumes greater financial value.
CONSTITUTIONAL AND LEGAL RIGHTS FRAMEWORK
This lack of ability to inherit cryptocurrency also poses serious constitutional issues, particularly under Article 300A of the Indian Constitution, which assures no one shall be deprived of their property save by the action of law. When a legal heir is prevented from accessing cryptocurrency either because there is no legislation or procedural mechanism in place, this deprivation might be interpreted as an illegal deprivation of property rights.
In addition, the combination of digital inheritance and privacy rights has to be analysed in terms of Justice K.S. Puttaswamy v. Union of India (2017), when the Supreme Court established the right to privacy as a fundamental right. The ruling recognized informational privacy and control over data as integral aspects of individual liberty. In the crypto space, this encompasses the right of the deceased to control disclosure of digital credentials as well as the right of the heir to access digital assets that are part of the estate.
The Digital Personal Data Protection Act, 2023, as ambitious as it is, does not yet have posthumous data governance provisions. Expanding this Act to cover succession processes for personal data so that lawful heirs may access digital accounts, wallets, or cloud storage under a balancing framework of privacy and inheritance is the next step. Digital estate succession must be identified as both a property right and a privacy interest in the digital age.
INDIA’S REQUIREMENT FOR LEGISLATIVE REFORM
India’s succession regime based on laws of the pre-digital age has to be brought up to date at once to be attuned to the realities of 21st-century property ownership. With the swift growth of cryptocurrency investors and users, the lack of a specific legal process for transmission of virtual assets is unsustainable. An all-encompassing, technology-responsive legislative action is necessary to fill the vacuum.
First, the Indian Succession Act, 1925 has to be amended so that it clearly includes “digital assets,” “virtual digital assets,” and “cryptocurrencies” in its definition of property. This will bring statutory clarity and judicial guidance to the probate courts.
Second, the Information Technology Act, 2000 must have a section or amendment defining “digital estate”, coupled with procedures for accessing after death, digital key custodianship, and appointment of digital executors.
Third, the government should release model guidelines for the valuation, taxation, and handling of cryptocurrencies in estate planning. This might include cooperation with crypto exchanges, cybersecurity experts, and estate attorneys to create effective and useful frameworks. In addition, digital wills, encrypted e-lockers, and blockchain-based smart contracts should be legalized as legitimate tools in estate planning.
Finally, a centralized regulatory framework with the Reserve Bank of India (RBI), the Ministry of Electronics and Information Technology (MeitY), and the Ministry of Law and Justice is needed to enforce consistent and effective policy. The inter-ministerial framework can ensure that legal certainty, asset protection, cybersecurity, and inheritance rights are well balanced in the digital finance era.
CASE LAWS
RBI v. Internet and Mobile Association of India
In a landmark decision, the Supreme Court of India overturned the RBI’s circular that prohibited banks from engaging with cryptocurrencies, stating that it infringed upon the right to trade. This ruling effectively recognized cryptocurrencies as legitimate tradeable assets within Indian law.
AA v. Persons Unknown
The UK High Court determined that Bitcoin is classified as property under English law, making it eligible for a proprietary injunction. This decision confirmed that crypto assets can be owned and safeguarded just like any other personal property.
In the Estate of James Allen
The New Zealand High Court ruled that the cryptocurrency belonging to the deceased was part of his estate and could be legally distributed to his heirs, affirming that crypto-assets are inheritable under succession law.
Quoine Pte Ltd v. B2C2 Ltd
The Singapore Court of Appeal acknowledged that cryptocurrencies have the traits of property and can be held in trust, further solidifying their legal status as a type of intangible personal property.
Ruscoe v. Cryptopia Ltd
The New Zealand High Court has ruled that users of a crypto exchange actually have a proprietary interest in their cryptocurrency holdings. This means that cryptocurrencies are recognized as a type of intangible property that can be legally owned and transferred.
CONCLUSION
The rapid growth of cryptocurrencies has completely transformed the financial world, but it’s also left legal systems struggling to keep up, especially when it comes to inheritance. Cryptocurrencies are considered movable intangible property and carry significant economic weight, yet their decentralized and pseudonymous characteristics create major hurdles for passing them on after someone’s death. In India, the existing succession laws don’t provide the necessary tools for transferring, accessing, and safeguarding crypto-assets once the holder is gone. Some countries, including India, the UK, New Zealand, and Singapore, have started to recognize cryptocurrencies as property, which is a step toward integrating them into estate planning.
However, without clear legal guidelines, rightful heirs risk losing access to these digital assets due to technical issues, cyber threats, and procedural loopholes. This situation also raises concerns under Article 300A of the Indian Constitution, suggesting a possible infringement on property rights. Therefore, it’s crucial to push for thorough legal reforms. By introducing secure probate processes, digital estate planning resources, and precise definitions for virtual assets, we can ensure legal clarity, protect assets, and uphold property rights in our increasingly digital world.
FAQS
1. Can cryptocurrencies be inherited under the Indian law?
Ans. Yes, cryptocurrencies can be inherited as part of the estate of a deceased person, but Indian succession laws do not currently specifically acknowledge them. They can be treated as movable intangible property, but legal formalities and clarity are absent.
2. If the private key to a cryptocurrency wallet is lost following the owner’s death?
Ans. If the private key is lost and never disclosed to anyone, then the cryptocurrency is lost forever. There is no recovery because of the decentralized nature of blockchain technology.
3. Is there any legal precedent for crypto-inheritance in India?
Ans. Although there is no direct Indian case law of crypto-inheritance, the RBI v. IAMAI (2020) ruling upheld the legality of crypto transactions, indirectly validating the status of crypto as a financial asset. Foreign jurisdictions lend support to its inheritable status.
4. Can I include crypto holdings in my will?
Ans. Yes, and it is strongly advised. A testator can incorporate information about cryptocurrency holdings in their will, preferably along with safe instructions on how to obtain access to the wallet (e.g., through a digital vault or through executor directions), without exposing sensitive details in the document explicitly.
5. Will inherited cryptocurrency be taxed in India?
Ans. India does not currently charge inheritance tax, but the inherited cryptocurrency will be charged capital gains tax or tax as a Virtual Digital Asset if it is transferred or sold under the Finance Act, 2022.
