By Paul Rossini, CEO & Co-Founder, AssetPass
According to research produced last year, it’s estimated that 20 percent of the roughly 18.5 million bitcoin in existence has not moved from its respective addresses in five years or more. It considers these 3.7 million bitcoins (worth around $207 billion) as “lost”.
Whether people lose their private key or even become the victim of a hack, the problem highlights the desperate need for consumers to have greater security and safer storage to access their digital assets. This will help to prevent them from being lost and reduce the likelihood of them being hacked. This is especially true if the worst should happen. For example, the owner passes away leaving no access to these assets for their loved ones, or they are locked out of their accounts and potentially losing access to their assets.
Too often, the lack of an education process has left consumers to find this out for themselves. It is time for financial services to build customer trust and loyalty by leading the charge on helping customers safeguard their digital assets, when many digital assets are currency-based.
Financial service providers can build customer trust and retention with digital asset support
Whilst it’s often seen as the consumers responsibility to check both the legal status of the investments (and their host platform) and – more broadly – to check what consumer protections are in place prior to investment, as well as consider risks involved, there is a dire need for more support for buyers and those investing in digital currency when it comes to accessibility and safeguarding.
The vast majority of crypto accounts can only be recovered with a 24 seed phrase (aka password), which cryptocurrency exchanges advise users to keep secure and private to ensure that their accounts can’t be accessed, cloned or their funds spent. But the advice often just suggests users write this phrase down and keep it in a safe place. This is a highly fallible solution, because if lost a user could be permanently locked out of their accounts and unable to access their digital wealth.
To increase customer trust and loyalty, financial advisors should educate digital asset owners on storing and managing digital wealth securely. This means they need to ensure digital currencies have the same protections and processes as traditional currencies whereby the rightful owners have methods by which they can regain access to it even when they lose their security information.
Where current processes are lacking, financial organisations need to look to the private sector solutions to further support customers, such a recommending apps or tools than safeguard their assets. There need to be secure, digital processes that will stop people from having to staple the passwords for their digital wealth accounts to their Wills or from giving them out to their beneficiaries before they pass in the hope, they won’t access their accounts. For example, leveraging a digital trustee process, where the trustee can release the digital assets to the designated beneficiaries at the appropriate time.
Digital asset owners must clearly understand the challenges of passing down digital assets
For those buying or investing in digital currency, there is often little thought given to how loved ones or beneficiaries can access their digital wealth if or when the worst should happen. Many believe it’s sufficient to put it in a will, but in many cases it’s not. Simply stapling digital asset information to a Will often means that the information is exposed to people who are not entitled to the information, such as the executor or if a digital asset owner loses access to their access information, most of the time it is nearly impossible to recover access.
Often when consumers buy digital currency, there seems to be a missing link between purchasing digital assets and safely storing them and passing them on. The purchase journey of a digital asset has always been focussed on gain and profit, but never accompanied by information about what to do should the worse happen. Ultimately, the wealth gained through digital assets is temporary, if digital assets are too easily lost after their owner has passed or if they lose access to them.
Forward planning can ease administrative nightmare
Financial institutions should do more to encourage customers to manage their digital legacy to ease the process during times of bereavement as a duty of care to the consumer. This not only helps owners of digital assets to protect and safely store and pass on their assets, but it can also increase trust and loyalty between financial advisors and customers, if there is adequate advice and support when it comes to safeguarding such assets.
This is especially true when it comes to allocation of assets during probate, when the administration process of passing on digital assets is often far more complex than passing on traditional currencies or assets. For example, if you get locked out of your bank account, there are systems in place that allow you to get back in, like going to the bank in person to show the appropriate legal identification or through probate in the event the original owner is deceased. Whereas there currently isn’t a comparable process for digital currencies.
Ultimately, more and more consumers will look to digital currency to amass wealth and as a means of investment. But accessing and safeguarding digital assets has become an issue for many customers, with little or no support available should these assets be lost or stolen. To help increase trust and customer loyalty, financial advisors and institutions should advise clients on what steps can be taken to ensure accessibility and transfer of ownership issues are a problem of the past.
