FREE CHAPTER from ‘A Practical Guide to Estate Administration and Crypto Assets’ by Richard Marshall


The current legal reality

Let’s begin with a stark reality: ownership of Digital and Crypto Assets is a legal enigma. At the time of writing, the UK Law Commission have launched a consultation on Digital and Crypto Assets, recognising that they do not fit within the current legal definitions of property.

By their nature, Crypto Assets cannot be real property, and under current legal constructions can only therefore be some form of personal property. Personal property itself has two categories – something you can physically hold (a chose in possession) or something that can only be obtained through legal action (a chose in action).

On the face of it, Crypto Assets do not fall within either legal definition of personal property. This issue was looked at in the context of Cryptocurrency in an unreported case of Robertson V Persons Unknown from 2019 regarding cryptocurrency fraud, and again in the case of AA v Persons Unknown [2019] EWHC 3556 which was a cryptocurrency extortion case. Following this it was confirmed in the cryptocurrency fraud case of Ltd and another v Persons Unknown Category A and others [2021] EWHC 2254 (Comm) that, in the court’s opinion, Crypto Assets are a chose in action.

From these cases, it is clear that the current legal framework has an uneasy relationship with Crypto Assets.

For now, however, these cases give some reassurance to anyone acting as a Personal Representative of an estate which holds Crypto Assets. Given the court’s interpretation, these cases can be looked to as authority for Crypto Assets falling within the Personal Representatives duties under S.9(a) of the Administration of Estate Act 1925 (as amended) to “collect and get in the real and personal estate of the deceased and administer it according to law”.

Given that these recent judgements place Crypto Assets within the duties of Personal Representatives to correctly administer a deceased person’s estate, it is therefore fundamentally important to, at least have an awareness of, and at best to fully understand, how these assets work.

In light of the difficulties in the relationship between the current legal framework and Crypto Assets, it is therefore helpful to perhaps start with something with which many will be more familiar.

The ‘traditional’ digital estate

Most practitioners are now acquainted with the concept of a digital estate. This can include things such as social media accounts, online bank accounts; auction accounts, betting accounts, email accounts, music libraries stored on Apps, and video streaming accounts, as well as the electronic devices on which these assets are accessed and stored.

Whilst some of these assets have a clear monetary value, some have a more sentimental value, and a paradigm shift in estate administration has arisen with regards to the latter. The days of leaving your CD collection and family photos to a relative or close friend are largely gone. Now, we see what can at times be described as a bun fight over access to social media accounts to retrieve, preserve and share treasured memories in the form of photographs, posts and content. We also see wilful violation of user agreements in the form of passwords being shared, and devices accessed, after the death of the asset holder as most of these agreements are made up of non-assignable licences.

For all the familiarity and interaction with digital assets, as mentioned, we are still very much in an unregulated space, with the law applicable to assets in the physical world struggling to translate and be effective for their digital counterparts.

One big positive, however, is that with most digital assets, there is still a third party with ‘control’ over the accounts held by the deceased. If there are any difficulties in locating or accessing these accounts, there is still hope that the organisation hosting the site will be able to assist. There is (in theory) a human being behind the screen who can be reached and reasoned with in order to resolve the difficulties of locating and accessing digital assets and many site are also now making provisions for circumstances where an account holder dies.

Where once there was a concern about online and paperless bank accounts removing the paper trail of breadcrumbs that Probate Practitioners so often rely upon, there is now the realisation that the majority of online banks in this Fintech space can be contacted and a search undertaken to ascertain whether the deceased held any such accounts with the relevant online bank.

For many users, however, this Internet Service Provider centric approach to online content has been a blessing and a curse. For anyone creating and uploading content online, autonomy over that content is largely lost once it is uploaded to a website. Fundamentally, the third party ‘hosting’ the website has ultimate control over the accounts which are created and the data which is provided. It has led to an online eco-system focused on monetarising data which in turn is able to drive marketing and promotional advertising to then enable creators to financially benefit from what they upload.

For any practitioner acting in the administration of the estate of an influencer or content creator, understanding this eco-system is key to being able to effectively administer the estate and ensure the assets, and income streams, of the estate are correctly administered after death.

Estates with Crypto Assets – the future is here

Control and transparency are therefore the order of the day for a new look internet – often dubbed as ‘Web 3’ – and for many, at the heart of this, are Crypto Assets.

This new wave of internet has seen a move away from third parties hosting content, to communities validating within themselves what they do, which has been underpinned by Blockchain technology.

The focus of Crypto Assets is therefore a Decentralized model of self-regulation, allowing ultimate control and the promotion of transparency. There is also a large focus on security, with cryptographic methods of generating addresses (public keys) and passwords (private keys) for accessing and transferring Crypto Assets (as well as verifying the transactions – for example through mining crypto currencies), adding to the immutability of the technology behind the assets.

There are, of course, a number of paradoxes within this model; where the Decentralised nature of the network allows for transparency around the transactions it records, it also allows anonymity of the end users; where the cryptography creates security the self-regulation leaves the end user vulnerable to being locked out of accounts indefinitely (or until quantum computing can break the cryptography); and where the communities of Decentralised networks are still largely centred around sites hosted in the traditional way, it leaves them open to more traditional cyber security hacks and scams.

Why is any of this relevant? Well, this is the context in which Probate Practitioners are being faced with a relatively new asset class that must be administered on the death of the holder. Whilst this is not a study of the particularities of the technology or the mechanics of the eco-systems within which they operate, to fail to understand the basics of this is like being ignorant of how the stock market works in relation to the nuances of stocks and shares, not just with regards to share price fluctuations, but how income is generated and whether holdings are ex-dividend, entitled to script rights and so on. It is also fundamental to understand how these assets can be held, just like with stocks and shares which can be certificated, held as nominee by a discretionary manager and such.

It is also important to appreciate Crypto Assets as a different class of assets as opposed to what we would now describe as traditional Digital Assets. At the heart of this difference is the technology, and it is the technological footprint of Crypto Assets which also creates a new set of breadcrumbs for Probate Practitioners to follow when trying to first identify the Crypto Assets of the estate before moving on to access, secure and distribute them on behalf of the beneficiaries.