The South African Revenue Service SARS has released a statement in which it noted its interpretation of cryptocurrency as an “asset of intangible nature” which is to be treated as gross income or alternatively as capital for income tax purposes.
As a consequence of its novelty, many common legal aspects surrounding crypto assets are unclear in comparison with assets of a similar nature such as bonds and shares. The main concern at present is that as crypto is decentralised, there is no-one regulating the transactions, and so there is too much opportunity for fraud. In the last month or so, several exchanges have been hacked and investors have lost money.”
What happens to my crypto assets in death?”
Crypto considerations in death
It is undisputed that cryptocurrency is an asset which naturally forms part of a person’s estate and, as such, it is eligible for inheritance (Estate Duty) in a deceased estate. Despite its novel nature, the general principles of the law of succession apply to cryptocurrency as with any other investment forming part of a person’s estate.
However, the uncertainty creeps in when one considers the practical aspect of leaving behind a crypto asset. Cryptocurrency is held in the form of a “wallet” which is accessible only by means of a virtual key, in the form of a password, which is known only to the owner of the wallet. Without such a key, it is virtually impossible to gain access to the wallet, as was recently the case in the UK where a deceased’s heirs were left perplexed in light of the fact that they had no means to access their crypto inheritance.
In order to ensure your estate is divided between your heirs, it is of critical importance to keep an updated will so as to ensure that your estate is not dissolved on an intestate basis. This is particularly important with regard to crypto assets which may only recently have been acquired, and may as such not yet be included in your will. Subsequent to including crypto assets in an updated will, it is crucial to include all relevant information concerning access to your crypto wallet or ensuring that your heirs are at least apprised of such information. Caution is key, as criminals and hackers will gain complete access to your crypto assets when in possession of the crypto key that unlocks an otherwise virtually impenetrable wallet.