Cryptocurrency is quickly becoming a new form of property, aside from real estate, gold, precious coins, stocks and works of art. As with any other type of asset, there must be some rules and laws regarding the juridical status of cryptocurrencies, how they can be inherited, sold or lent. Crypto market is still an unregulated area, and many countries ignore the need of acknowledging the fact that they exist, or just ban them straight away. In this article we’re gonna highlight the problems related to crypto in its juridical aspects of dealing with crypto or possessing some crypto assets.

Inheritance

There is one particular problem, unique to crypto assets. Cryptocurrency isn’t a physical asset, thus the rights of ownership can’t be transferred, it can’t be handed over to an heir or transferred in any other way if this heir doesn’t have the private key to the wallet where the funds are stored. The only way to make sure your heirs will receive your funds is to give them access via private keys. How can you organize the proper inheritance of your crypto assets to your family or someone else you want to receive it?

First option is to go to a notarial office. Make a will. Put it in a safe. Also with this will you have to put in one of these things:

A paper wallet. Just a sheet of paper with a private key written on it. Can be put into a mail envelope and sealed to ensure no one will be able to see it. Winklevoss brothers, Bitcoin billionaires, store their private keys in paper wallet. Their private keys are written on paper, cut to many pieces, and now these pieces are kept in various banks all over the world. A cold wallet. A cold wallet is a special device designed for exactly one thing: to store crypto safely. To access the coins stored on cold wallet you’ll need a special password, so be sure to include it as well. A flash memory card. A flash memory can be used instead of a cold wallet. It’s less safe in terms of security, and it’s more fragile in terms of durability. A broken flash card means that you or your heirs won’t be able to recover files stored on it. You can store your private keys written in a txt file. But it’s not the best option.

The right of ownership

Due to its decentralized nature, the only way to own crypto coins is to own the private keys of an address where these coins are stored. If you expose your keys to a third party and as a result your funds get stolen, you can’t recover them. There’s no way to reverse or cancel a transaction, so keeping your private keys safe is your problem. There won’t be any bank or authority to help you. The robber can even get arrested and sentenced, but if he won’t give away the keys, the funds will be stuck at his address for as long as he wants. There’s no way to move someone’s funds​ against his will, that’s the biggest advantage and the biggest flaw of crypto.

Using cryptocurrencies as a collateral

There’s a different approach to giving crypto-backed loans. There’s a concept of risk in banking system, and every client must have a risk profile assigned to him. Before lending money to any client, a lender must weigh the risk, estimate the chance of possible delay in repaying the debt and then decide if he can lend him money. But there are some nuances if we dealing with crypto and blockchain in general.

To give a collateral-backed loan you don’t have to know the identity of your client if you get a pledge, in our case, Bitcoin, in your full possession. But you have to know his name to send him the loan to his bank account. Thus using the decentralized asset as a collateral makes no difference, and you have to follow the same steps as usual.

Why would you need to pledge your Bitcoin in the first place? At the present moment a number of lending platforms issue (or plan on issuing) loans backed by crypto collateral. Let us take eCoinomic.net as an example. Let’s suppose you bought Bitcoin at $9,000 and it crashed to $6000. Suddenly you need money. You have two options: to sell at loss and 30% of your initial investment will be gone forever, or pledge it, using some lending platform services. You get the loan, and when you don’t need these money, you return it and get your coin back even if its price has tripled. That’s how it works. You don’t risk anything, you can keep your coins and find them a good use at the same time.

Summary

As we see, if you’re owning any amount of cryptocurrency all you have to do is to be cautious and keep your private keys in a safe place. Can we call cryptocurrencies a valuable asset? Definitely. Can we declare that its price will continue to grow? We don’t know, so we can’t. The thing is that the widespread adoption can drive the price up, but you’d better get used to it right now. While nobody can change the fact that the transactions are irreversible, all other aspects of owning and using crypto can be discussed and the rules can be defined. Anyway, you can own it, pledge it, use it right now. Why not?