The billionaire CEO of Microstrategy, Michael Saylor, has said that, when he dies, he will take the keys to his nearly 18,000 bitcoins with him, leaving his coins locked up on-chain and out of circulation forever.
Think of Saylor’s plans as a pay-it-forward gesture to Bitcoin’s future. By burning his keys, he’ll contribute to Bitcoin’s scarcity and potentially its value–a kind of systems-level, digital economy variation on the style of end-of-life philanthropy encouraged by Bill Gates and Warren Buffett.
Most other crypto owners, however, are not as altruistic as Saylor. That’s because, for many people, one of the main reasons for buying Bitcoin is to build generational wealth.
But Bitcoin isn’t like most other assets, particularly when it comes to succession planning. How and whether your loved ones get your bitcoin when you die can be a lot more involved than simply naming a beneficiary–and has everything to do with choices that you make today.
Banks make it easy to inherit, crypto firms do not
Say you have a savings account, hold some stocks, have a 401k or IRA in your name, and/or own some property. You’ve named a beneficiary at your bank(s) and brokerage(s) and laid out who gets what in your will. While this process may create a legal duty, it’s of the kind that legacy financial institutions deal with every day. The end result is that, when your time comes, your stocks and other investments are distributed to your heirs according to a smooth and well-established process.
That’s not the case with Bitcoin you hold on an exchange. Seriously. I looked into the beneficiary policies of several popular exchanges and, to my disbelief, discovered such policies are often non-existent.
The reality for now is that it’s not possible to designate an heir for the bitcoins you hold on most major crypto exchanges–a fact that is likely more a function of the industry’s youth than anything else. And while it is possible for the folks in your will to lay claim to your assets when you pass, the processes for doing so vary and they’re not exactly easy.
Most exchanges require a large amount of documentation before they will make good on a beneficiary request. Some ask you to have the foresight (and security risk appetite) to write your account number in your will. Some require a separate court order. And they all tend to be lengthy, sometimes taking more than a year of back and forth with customer service to complete. Not a great look for the future of money.
DIY crypto inheritance: risky and expensive
Not every Bitcoin holder keeps their coins on an exchange, of course. Many keep their keys offline, in a hardware wallet or on a paper or steel wallet. While this offers a very high degree of security, it also creates its own set of challenges when it comes to succession–the kind of challenges you might face if someone buried a safe full of cash in a safe location.
If you opt for one of these self-custody options, your heir will typically need either: 1) detailed access instructions on how to open your Bitcoin wallet; or 2) your seed phrase—the random set of words, which will let them recreate the wallet. In the wrong hands, either could function as a kind of “how to steal your bitcoin” kit for anyone who might find it (even while you’re still alive).
And if your heir does manage to follow your treasure map, there’s plenty of room for human error. A few errant PIN or passphrase attempts and your loved ones could get locked out forever, inadvertently adding what should be their coins to the Michael Saylor bitcoin donation fund.
Some third-party inheritance solutions do exist, but they aren’t perfect: some are costly; some require advanced technical skills to implement; and some require you to trust a third party with your seed phrase, which may open up new vectors for malicious actors to steal your assets.
Time for an easy, secure way to pass on your bitcoin
Losing a loved one is hard enough. Inheriting their coins shouldn’t make it harder. When it comes to a crypto inheritance, the best solutions will make it easy for heirs to collect what’s theirs when you’re gone, with room for human error baked in, without compromising the security of your coins while you’re alive.
At Block, we’ve built Bitkey, a new form factor for self custody that gives users the ability to name a beneficiary for their coins, making what has been and still largely is a cumbersome process industry-wide into something intuitive and easy not just for bitcoin holders, but for their heirs, who might not have any exposure to crypto at all until they inherit it., The more common tools like this become, the better off consumers will be, and the more likely it is that bitcoin will become the enduring, generational asset many of us believe it to be.
Jason Karsh is head of Business, Proto and Bitkey at Block. The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
