If you have invested in crypto or NFTs, a trusted person needs to know three things: 1) that you own them; 2) their location; and 3) how to access them.
Digital Assets: These include cryptocurrency, a digital or virtual currency that is secured by cryptography (e.g. Bitcoin, Tether, Ethereum, Dogecoin), and nonfungible tokens (NFTs), other non-currency assets that exist in the digital world (e.g. digital artwork and collectibles).
Digital Assets are unique. They are created in cyberspace out of sight where they can never be seen. They have no physical form. They require no physical record. They exist behind an invisible wall with an invisible door that opens with an invisible key.
Imagine yourself as the Digital Asset purchaser. You are alone in front of a computer. You stroke some symbols on a keyboard and transfer $100,000 from your bank account to a digital wallet that you just set up with a key and a password that only you know. The only trace anywhere is a transfer from your bank account to an unknowable recipient. The key and password are in your head and not written down anywhere. What happens if you suddenly pass away? Your Digital Assets will be lost forever.
Therefore, you need to entrust someone with the information necessary to access your Digital Assets. But who can you trust?
Only an exceptional person will do; the best person imaginable (“BPI”); the gold standard for honesty; the person who puts your intentions first; someone who would never let you down.
Once you identify your BPI (probably a person you would appoint to be your Executor or Trustee), there are three things your BPI must know about your Digital Assets.
First, your BPI needs to know that you own Digital Assets. Unlike more traditional assets, like bank accounts, that leave an obvious paper trail, there may be no trace of the Digital Assets that you own. To ensure that your BPI can access your Digital Assets, you must tell your BPI that you own them.
Second, your BPI needs to know where your Digital Assets are located. Digital Assets have no physical location. Digital Assets do not require traditional brick-and-mortar banks, other financial institution intermediaries, or paper account statements.
You may think of the digital wallet as the location for your Digital Assets, but a digital wallet is not a location. It is an application that runs on your desktop, mobile device, flash drive, or other specialized device. The digital wallet’s purpose is to facilitate Digital Asset transactions and store your confidential payment information – your keys.
Your BPI will need answers to the following questions regarding your digital wallet:
- What device is your digital wallet on? A computer, phone, or flash drive?
- Where is the physical location of the device? Your desk drawer, safe, or safe deposit box?
- Where on the device is your digital wallet located? A folder or application shortcut?
- What other security information will be needed to access the device? A combination for your safe or a password to your device?
Third, once your BPI locates the digital wallet, the BPI needs to know how to access the Digital Assets inside it. All digital wallets require a password in order to access them. Further, all Digital Assets require a private key in order to unlock their value. Thus, it is essential that your BPI knows all your passwords and keys. Without this information, your Digital Assets will be inaccessible and the assets will be lost forever.
Your next task is to come up with a fool proof plan for communicating the information described above to your BPI at the right time.