Digital assets are making separations tougher than ever before, legal experts told City A.M., as lawyers grapple with rapidly changing valuations and hard-to-trace assets.
So-called digital divorces are on the rise, with the Financial Conduct Authority revealing last summer that around 2.3m adults in the UK already hold crypto assets – which is expected to have grown exponentially over the last year.
And assets are increasing in value, which has increasingly made them of interest amid divorces. The global NFT (non-fungible token) market hit a valuation of £16.5bn in 2021, according to blockchain app store DappRadar.
“The ownership of digital assets in a divorce scenario are definitely on the rise,” partner and head of family law at Ashfords, Zoe Porter told City A.M.
“Values can fluctuate dramatically over a very short period of time, meaning that family lawyers must be nimble in their approach – they must be regularly checked, as the rise or fall of the value can impact on the landscape of a settlement or Order.”
It can also be more difficult to trace assets if someone is not honest with their disclosure, senior partner at IMD Solicitors, Iwona Durlak added.
“Amidst financial uncertainly in financial markets and parties electing to be more entrepreneurial in managing their own assets and creating them too, there has been a growing trend towards investing in crypto currencies and Non-Fungible Tokens (NFTs),” partner in the family team at SA Law, Kiran Beeharry explained.
While digital assets can be traced to a crypto currency platform if they have been bought through an ordinary bank account, “in circumstances where crypto currencies are moved from a trading platform to a personal e-wallet, there are frequent claims that passwords are lost and so the e-wallet value should be discounted.
“Such claims can be genuine or fictious,” but both minimise the available assets, he added.
Che Meakins at Rayden Solicitors added that “Even when NFTs are out in the open though, it’s not entirely clear whether they’re all taxable assets… This is all new territory for divorce proceedings, but digital assets are here to stay, so divorce law will surely have to adapt.”
“As crypto is still in the adoption phase, regulators and lawmakers are still learning just like consumers,” Kristjan Kangro, CEO of crypto investment platform Change said.
“However, there’s an upside here. Once you’ve decided how to split, it’s incredibly easy and fast to move the assets between parties, shortening the process significantly.”