Crypto assets are becoming an increasingly popular part of investment portfolios, both among seasoned investors and those just dipping their toes in.

Back in 2024, as many as 12 per cent of UK adults owned cryptocurrency, accounting for some seven million people, according to the Financial Conduct Authority. 

Given Bitcoin price spikes since then, and the growing popularity of the asset class, the figure is now likely much higher.

As more people choose to invest their money in cryptocurrency, the number of people planning to pass on these assets when they die will be increasing.

But families could be set to lose millions worth of crypto assets due to difficulties in tracing the ownership of crypto wallets, and a lack of requirements for platforms to facilitate probate, according to TWM Solicitors.

The firm warns that families will not be able to access these digital assets in the same way they would other investments or assets like property upon the death of the owner.

Given the meteoric rise in value of some of these assets over recent times, the value of these crypto holdings could have risen significantly. 

The average investor held some £1,842 in crypto as of November last year, but some portfolios will run into the tens or even hundreds of thousands. 

We explain what investors need to know about what happens to their crypto after they die. 

Why is crypto different to other assets?

Upon death, most assets including properties, cash and stocks and shares are passed onto beneficiaries through an official process known as probate. 

This allows executors to access accounts and assets, and transfer these to the beneficiaries named in a will.

For banks, investment platforms and building societies, there are processes in place to ensure that these firms facilitate this process.

Financial Asset Searches are used to locate assets owned by the deceased, ensuring that firms track down any accounts or assets held with them.

These searches mean that executors can be sure the entire estate is being considered, especially when they and the beneficiaries might be unsure of the full extent of their loved one's assets. 

With crypto assets, however, this process doesn't take place in the same way.

Crypto platforms aren't legally required to facilitate probate in the same way that other financial institutions are, which means that they aren't automatically accessible, and might not even be traceable, under existing methods.

Stuart Downey, partner at TWM, said: 'To look for most normal financial assets you can conduct a Financial Asset Search which is relatively inexpensive and contacts hundreds of organisations.

'However as far as I am aware, there's no such thing for cryptocurrency. Even if there were, it is unlikely to work for private wallets.'

The problem of anonymity 

There are broadly two ways to hold cryptocurrency: on an exchange, and in a wallet. 

Holding crypto assets on an exchange, a digital platform similar to a stock exchange, means you are able to trade your crypto directly, rather than via a platform - but it also leaves it more vulnerable to hacks, the exchange going out of business or the account being frozen.

Wallets, on the other hand, offer a secure way to store crypto in the long term. This doesn’t mean your crypto is stored inside a digital wallet, rather the wallet stores the private keys associated with the crypto assets.

Wallets offer higher protection when compared with exchanges, and you are the one holding the private keys, rather than the exchange.

They allow crypto assets to be located on the blockchain network, are only accessible via private keys.

Adding to the problem is the fact that that many of these wallets are created under pseudonyms in order to preserve privacy.

This means that families may find it very difficult to locate crypto assets after the owner dies.

Downey added: 'Families are at risk of losing access to crypto assets after the original investor's death - even if they are named beneficiaries in a will. 

'We urgently need reform to ensure crypto exchanges are integrated into the standard probate regime.'

The reality is that crypto exchanges lag behind legacy financial institutions in providing access for personal representatives. 

Many UK crypto investors are unaware that their investments could be lost when they pass away.

TWM says there needs to be reform to prevent estates suffering permanent losses as a result of these issues.

What do big crypto platforms do when someone dies? 

Where crypto assets are held on an exchange, the ease of accessing them largely depends on the platform itself.

In Britain, many of the largest crypto exchanges and brokers do have processes in place to deal with the death of crypto holders, even though they are not required to do so legally.

Bivu Das, UK general manager at crypto exchange Kraken, said: 'As crypto becomes part of everyday wealth, addressing what happens to digital assets after death is essential for long-term adoption. 

'At Kraken, we've established clear processes to support families and estate executors with compassion and discretion.'

'While we don't yet offer named beneficiaries, we work closely with executors who provide the necessary legal documentation to access a client's account.

'Forward-looking users may also choose to include their Kraken public account ID in their will or estate plan - a simple, proactive step that helps ensure digital assets are passed on securely to the next generation.'

Likewise, Etoro, also has measures in place to ensure that executors can access a user's assets.

The platform told This is Money: 'As a multi-asset platform we treat crypto just like any other asset class. Once a relative contacts us we talk them through the process including what documents we need for verification purposes.

'Once death has been confirmed we close the account and funds are transferred to the executor or estate bank account. We endeavour to make the process as simple as possible.'

Coinbase, another of the UK's most popular platforms, says it will also help families access the deceased's assets, even when they don't have access to the account.

This process involves submitting various probate documents, as well as ID and a death certificate.

What if crypto is in a private wallet?

When crypto assets are accessible via a wallet, rather than being on-exchange, it can be much more difficult to locate and gain access to the tokens.

Etoro warns: 'You may decide that it is best to store your crypto in your own crypto wallet. This means that you can access the crypto at any time. However, this also means that you are solely responsible for it.

'This means ensuring that those you wish to leave these crypto assets to have the means to access this wallet i.e. you will have to share the wallet and password details.'

Essentially, the onus is on the owner of the crypto assets to make arrangements before it is too late.

Downey said: 'Digital assets like crypto are usually highly encrypted to protect the investor's assets, making it extremely difficult for anyone other than the individual investor, or someone in possession of the key, to access these assets.

'If the original investor passes away their crypto wallets may be effectively locked forever.'

To prevent this from happening, crypto investors can create a crypto inventory.

A digital inventory allows users to record the details of their crypto holdings, including information such as passwords for their devices, usernames for their accounts and their private keys for crypto wallets.

Your will should specifically mention your crypto assets and how you want them distributed, as well as authorising your will's executors to access these assets.

Downey said: 'It is essential that crypto investors seek professional advice when drafting their wills to ensure their beneficiaries and executors know the value of the digital assets and instructions on how to access them securely and who they should go to on death.

'This could be with an encrypted USB drive with seed phrases, a hardware wallet and pin, or a 'dead man's switch' service that sends the information to the executors or beneficiary.'

Is crypto subject to inheritance tax? 

Cryptocurrency is treated as property for inheritance tax purposes. 

It means that if you pass on your crypto to someone after you die, your estate may need to pay inheritance tax above a certain level. 

This will also be determined by the value of the rest of the assets in your estate, such as property or stocks and shares. 

Read our full guide to inheritance tax here.