Ascryptocurrencies become increasingly popular, it is vital to engage in safe andthorough wealth planning around cryptocurrency investments. A recent survey byHANetf revealed that approximately 75% of major wealth management firms acrossEurope expect to embrace cryptocurrencies over the next 12 months.
Giventhe intangible and autonomous nature of crypto assets, traditional wealthplanning methods are often insufficient to efficiently protect and manage suchcrypto tokens. With the broader context of a heightened risk of fraud in themarket nowadays, this further enforced the need for safer token managementstandards.
Besides,when securing tangible assets, traditional tools and methods, such as wills,can be relied upon and prepared by lawyers to outline the relevant clauses andconditions clearly,However, due to the unique nature of cryptocurrencies,traditional methods may not be sufficient to provide adequate protection andmanagement of tokens.
Storing and Accessing Crypto Assets
Cryptowallets are necessary to securely store and trade cryptocurrencies. Investorsmay also rely on them closely to protect and validate transaction information.
Buildingupon that, other methods that can be used to store crypto assets, include cryptocurrencyexchange web platforms,applications and different types of wallets, such asweb-based or mobile wallets (known as ‘hot wallets’) and hardware-based walletslike computers (referred to as ‘cold wallets’).
Toaccess crypto assets or transfer them, an owner typically needs the publicaddress (to receive funds) and the private key (to spend funds). However, oneof the biggest security risks is the loss or theft of the private key.Therefore, some investors choose to split their assets and store them indifferent locations; while others use “two-factor authentication” to gainaccount access, requiring a one-time-use code in addition to the primarypassword.
Regulatory Differences
Itis good practice to identify the applicable regulations to crypto assets inone’s country of residence.. This is especially important when many countriesstill lack clear regulations surrounding the platforms that operate and providecrypto asset management services.
Forexample, in Bulgaria, a centralised check can be performed at the BulgarianNational Bank on all cards, bank accounts, and safety boxes held in the name ofa deceased person.
Wealth Planning
Lastly,it is critical to plan ahead for the transfer of digital assets to heirs toensure they have access to the funds and cryptocurrencies. It is recommended to choose a trusted person(or persons) to share details in advance and write instructions on how they canaccess the crypto assets.
Theseinstructions should include where the currency is stored, private keys, seedphrases, and other relevant information about how to operate the funds.Additionally, locking information on crypto assets and respective pins indifferent safety boxes is an alternative solution if a significant amount ofcrypto is kept on hardware.
Inconclusion, safe and secure crypto wealth planning is crucial to protecting andmanaging cryptocurrency investments. For more information on crypto wealthplanning, please contact us at cryptodesk@newbalkanslawoffice.com. You can alsolearn more about NBLO’s works with wills, probate and inheritance services at https://www.newbalkanslawoffice.com/practice-areas/wills-probate-and-inheritance/.
You can read more publications from the New Balkans Law Office at the links below.
Alternative Investment Funds as a Tool for Diversifying Investments
Bulgaria’s start-up visa: a route into EU markets
Benefits of Shareholders’ Agreements
How to prove my Source of Funds/Source of Wealth from crypto asset profits
Investor protection before the European Court of Human Rights
A Comparative Study of the Leading IP Box Regimes in Europe