Digital Inheritance and Cryptocurrency Succession

Digital Inheritance and Cryptocurrency Succession Reconciling India’s Law of Succession with a Borderless Asset Class

Author: Mahewish Shaikh
Student, Savitribai Phule Pune Unviersity

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💡 3 Quick Takeaways

Cryptocurrency raises new questions for Indian succession law because legal recognition of ownership does not automatically provide heirs with access to the deceased’s digital assets.
The Indian Succession Act, 1925, the Hindu Succession Act, 1956, and applicable personal laws provide the broader framework for inheritance, but practical difficulties remain concerning private keys, exchange accounts and nominee arrangements.
Effective digital estate planning requires clear testamentary instructions, secure arrangements for transferring wallet access, informed executors and coordination between succession documents and digital-data nominations.

I. Introduction

Consider a succession dispute involving a person who dies holding cryptocurrency across an exchange account and a hardware wallet. Even where the heirs possess a valid succession certificate, they may be unable to access the wallet without the relevant private key or seed phrase. A legal entitlement to an asset does not necessarily translate into practical control over it.

This problem exposes a structural gap in India’s succession framework. The Indian Succession Act, 1925 (ISA), the Hindu Succession Act, 1956 (HSA), and uncodified Muslim personal law developed before the emergence of digital assets without a conventional physical location, central registry or documentary title. Cryptocurrency depends on cryptographic mechanisms that can make access difficult even after ownership has been established.

The Madras High Court’s decision in Rhutikumari v. Zanmai Labs Pvt. Ltd. & Ors., dated 25 October 2025, is discussed in this article as an important development in the recognition of cryptocurrency as property. However, recognition of ownership does not, by itself, resolve how cryptocurrency should be transferred upon death.

A related issue concerns nomination. In Sarbati Devi v. Usha Devi, (1984) 1 SCC 424, the Supreme Court distinguished nomination from beneficial ownership. A nominee does not necessarily acquire the beneficial title that belongs to the legal heirs. In the digital-asset context, this distinction becomes especially important when an exchange provides a nomination facility but the applicable succession law determines who is entitled to inherit.

This article examines how Indian succession law may apply to cryptocurrency holdings, the practical challenges of transferring digital assets, the relationship between digital-data nominations and inheritance rights, and the estate-planning measures available while legislative clarity remains limited.

II. Is Cryptocurrency Property at All?

A person may approach a lawyer after the death of a parent who held cryptocurrency worth several lakh rupees across multiple exchange accounts. There may be no passbook, registered deed or conventional record of ownership. Instead, the family may have only a seed phrase, which could be stored somewhere in the house or known only to the deceased.

Every succession claim involving such assets begins with a threshold question: can the asset be owned, and can that ownership pass upon death?

For years, cryptocurrency occupied an uncertain position in Indian law. It was not legal tender and did not fit neatly within conventional categories of property contemplated when the Indian Succession Act and the Hindu Succession Act were enacted.

In Internet & Mobile Association of India v. Reserve Bank of India, (2020) 10 SCC 274, the Supreme Court struck down the Reserve Bank of India’s 2018 circular restricting regulated entities from providing banking services to cryptocurrency businesses. The Court found the restriction disproportionate under Article 19(1)(g) of the Constitution. However, the judgment did not comprehensively determine cryptocurrency’s status under civil property and succession law.

The Madras High Court’s decision in Rhutikumari v. Zanmai Labs Pvt. Ltd. & Ors., O.A. No. 194 of 2025 (25 October 2025), is presented in the source as a significant development in this area. The dispute arose following the July 2024 security breach involving WazirX, in which cryptocurrency holdings reportedly worth approximately USD 230–234 million were compromised.

Zanmai Labs, the operating entity associated with WazirX, proposed a restructuring scheme involving the distribution of losses among account holders. Rhutikumari, whose 3,532 XRP tokens were reportedly worth approximately ₹9.55 lakh and were said to be held in an unaffected wallet, sought interim protection under Section 9 of the Arbitration and Conciliation Act, 1996.

The Madras High Court treated cryptocurrency holdings as property capable of ownership and beneficial enjoyment, referring to Article 300A of the Constitution. Drawing on the reasoning in Zanmai Labs Pvt. Ltd. v. Bitcipher Labs LLP, the Court also addressed the relationship between an exchange and the assets held for its users.

For succession law, the significance of property recognition is that an asset does not cease to be property merely because it is intangible or digitally held. Nevertheless, recognition of an asset as property and determination of the persons entitled to inherit it are separate legal questions.

III. Fitting Cryptocurrency into India’s Succession Framework

Neither the Indian Succession Act, 1925, nor the Hindu Succession Act, 1956, expressly establishes a comprehensive framework for cryptocurrency inheritance. In the absence of a dedicated succession regime for virtual digital assets, the relevant question is whether existing principles governing transmissible property can apply.

The Finance Act, 2022, inserted Section 2(47A) into the Income Tax Act, 1961, defining virtual digital assets for tax purposes. This statutory recognition provides an important reference point, although a tax-law definition does not, by itself, settle every question of civil ownership or succession.

Subject to the applicable personal law, cryptocurrency held by a deceased person may be dealt with through a valid will or, where there is no will, the applicable rules of intestate succession. The precise entitlement of each heir will depend on the governing succession law and the facts of the estate.

The practical difficulty lies in locating and accessing the assets. A bank account may be traced through know-your-customer (KYC) records even if the deceased did not expressly inform the family about it. A self-custodied cryptocurrency wallet, by contrast, may be impossible to access without the private key or seed phrase.

For cryptocurrency held through an exchange, heirs may need to establish their entitlement through the relevant legal documents and the platform’s procedures. A succession certificate under the Indian Succession Act may be relevant for qualifying movable debts and securities, subject to the statutory requirements and the nature of the asset. It should not, however, be assumed that every cryptocurrency holding automatically falls within the same procedural category.

Some platforms, including CoinSwitch, have offered nomination facilities through account settings. Such facilities may help with account administration, but they operate alongside the law of succession rather than automatically replacing it.

Tax consequences also require attention. Section 56(2)(x) of the Income Tax Act provides for specified exclusions concerning property received by inheritance or under a will. Sections 115BBH and 194S establish tax and tax-deduction rules relevant to virtual digital assets. The application of these provisions to a particular inherited asset and a subsequent disposal should be assessed under the law applicable to the transaction.

IV. A Conflict between Digital-Data Rights and Succession

The Digital Personal Data Protection Act, 2023, introduces another consideration. Section 14 addresses the nomination of a person to exercise specified data-protection rights after the death or incapacity of a data principal.

A nomination concerning personal data is not necessarily equivalent to a transfer of ownership of the economic assets associated with that data. The two serve different purposes.

For example, a person may nominate a friend or professional to manage aspects of their digital footprint while a will or the applicable intestacy rules identify someone else as the heir entitled to the economic value of cryptocurrency, a monetised YouTube channel, a domain name or associated goodwill.

Where these arrangements differ, questions may arise concerning the scope of the nominee’s authority and the rights of the legal heirs. The source identifies this potential conflict as an area requiring clearer statutory or judicial guidance.

The distinction is important: authority to exercise specified data-protection rights should not automatically be treated as beneficial ownership of the underlying digital assets. Equally, inheritance of an asset does not necessarily resolve every question concerning access to or management of personal data associated with it.

V. Practical Guidance for Digital Estate Planning

Until a dedicated statutory framework addresses these issues, careful estate planning can reduce avoidable uncertainty.

First, expressly identify cryptocurrency holdings in the will. The document should describe the relevant holdings and identify the exchanges or wallets involved, to the extent appropriate. The description should be sufficiently clear to help the executor identify the assets without unnecessarily exposing sensitive credentials.

Second, establish a secure access-transfer mechanism. A will that identifies cryptocurrency but provides no practical way to access it may leave heirs unable to realise their inheritance. Private keys and seed phrases should be handled securely, with appropriate arrangements for access after death. They should not simply be recorded in an openly accessible document.

Third, appoint an informed executor. The executor should understand the distinction between cryptocurrency held by an exchange and cryptocurrency held in a self-custodied wallet. These arrangements involve different access procedures and practical risks.

Fourth, coordinate nominations and testamentary instructions. Any nomination relating to digital accounts or data should be reviewed alongside the will. The objective is to minimise inconsistency between account-level arrangements and the intended distribution of the estate.

Fifth, consider cross-border issues. Where heirs are non-resident Indians or the assets involve overseas platforms, foreign-exchange rules may create additional questions concerning transfers and repatriation. The applicable requirements under the Foreign Exchange Management Act, 1999, and relevant Reserve Bank of India directions should be checked for the particular transaction rather than assuming that one general route applies to every inherited virtual digital asset.

These measures cannot eliminate every legal or technical obstacle, but they can make the deceased’s intentions clearer and reduce the risk that assets become inaccessible.

VI. Conclusion: The Future of Cryptocurrency Succession in India

The recognition of cryptocurrency as property is an important step in addressing the legal treatment of digital assets. The Supreme Court’s decision in Internet & Mobile Association of India v. Reserve Bank of India clarified the limits of the RBI’s banking restrictions, while the Madras High Court’s decision in Rhutikumari v. Zanmai Labs Pvt. Ltd. & Ors. is presented as a further development in the recognition of cryptocurrency ownership.

However, property recognition does not resolve every issue of succession. The Indian Succession Act, the Hindu Succession Act and applicable personal laws provide the broader framework for inheritance, but the practical transfer of digital assets depends on custody arrangements, access credentials and the procedures of the platforms holding those assets.

Nomination facilities may assist with administration, but they must be distinguished from beneficial entitlement under succession law. The Digital Personal Data Protection Act, 2023, adds another layer by addressing posthumous data-protection rights without necessarily determining ownership of the economic assets associated with personal data.

For individuals, clear wills, secure access arrangements, informed executors and coordinated nominations can help address these risks. For lawmakers, the remaining challenge is to clarify the relationship between succession rights, digital-data rights, custodial obligations and access to virtual digital assets.

The future of digital inheritance in India will depend on the interaction between established succession principles and the practical realities of digital ownership. Until the law provides greater clarity, the effectiveness of an inheritance may depend not only on who is legally entitled to receive an asset, but also on whether that asset can actually be accessed.

Key Authorities

Cases

Internet & Mobile Association of India v. Reserve Bank of India, (2020) 10 SCC 274.
Rhutikumari v. Zanmai Labs Pvt. Ltd. & Ors., O.A. No. 194 of 2025, Madras High Court (25 October 2025).
Zanmai Labs Pvt. Ltd. v. Bitcipher Labs LLP, Bombay High Court.
Sarbati Devi v. Usha Devi, (1984) 1 SCC 424.

Legislation

Indian Succession Act, 1925.
Hindu Succession Act, 1956.
Income Tax Act, 1961, §§ 2(47A), 56(2)(x), 115BBH and 194S.
Finance Act, 2022.
Digital Personal Data Protection Act, 2023, § 14.
Arbitration and Conciliation Act, 1996, § 9.
Foreign Exchange Management Act, 1999.
Constitution of India, arts. 19(1)(g) and 300A.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of The Lawscape.

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