A vast amount of media attention and investment hype has accompanied cryptocurrencies, the most well-known being Bitcoin. Through the use of blockchain technology, many cryptocurrencies have launched across the globe. They’re available to anyone with an internet connection.
A big splash was made recently by Facebook (and its associated companies) with the launch of Libra, which proposes itself as a new “borderless” payments system free of any national government control.
It’s worth bearing in mind that cryptocurrencies are treated as taxable income by SARS, with any resulting gain or loss triggering possible Capital Gains Tax liabilities. Although no legislation presently governs cryptocurrencies, this is likely to change in the near future. Purchasing of cryptocurrencies is, of course, subject to existing Exchange Control Regulation. No cryptocurrency is valid legal tender within South Africa, only Rands issued by the Reserve Bank qualify for the time being.
Now for the reason I’m highlighting this in a blog post: what happens to your cryptocurrency asset(s) when you die? Like any other asset in your estate, it will devolve on your heirs according to the stipulations in your Will (specific stipulations regarding cryptocurrencies are not required, but it may be wise to list them if your family is unaware of your crytocurrency investments or the extent of the cryptocurrencies you own) or to your intestate heirs if you have not executed a Will (hopefully you would not have neglected to execute a valid Will).
The critical thing to remember is that your digital private key must be available to your executor and/or heirs. The private key is what allows someone to access your cryptocurrency asset, without this key there is NO way to access and make use of the asset. Usually the private key is stored in a wallet of some kind, e.g. a computer programme/application, website, or smartphone application. The device on which your wallet and private key resides, must also be accessible to your executor and/or heirs.
Take all the necessary precautions to ensure that your private key and wallet device are secure from theft and cybercrime. However, ensure that your passwords and cryptocurrency assets don’t die with you and are accessible by a trustworthy executor.
PS for all those law nerds, of which I am one, check out the UK Lawtech Delivery Panel’s Legal Statement on Cryptoassets and Smart Contracts. South African and UK common-law are not in precise alignment but share several foundational principles, which makes this document a valuable primer on the legal status of cryptocurrencies and smart contracts
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