VIRTUAL WEALTH: THE COMPLEXITIES OF DIGITAL ASSET

VIRTUAL WEALTH: THE COMPLEXITIES OF DIGITAL ASSET

DIVISION

ABSTRACT
In a rapidly evolving environment, the introduction of digital assets has created complex challenges,
especially in the area of separation and inheritance. This article aims to identify the complex web of
issues related to the distribution of digital assets during divorce and in the wake of death. It
examines the financial, emotional and legal issues one deals with matters of separation and
inheritance. The discussion encompasses jurisdiction-specific regulations, valuation, dilemmas,
access disputes, and the critical roles of digital estate planning in ensuring a smooth transition of
assets. The need for clear communication, comprehensive planning, and legal adaptability can
create an environment to deal with modern issues.

When we look at the physical assets, they can be easily divided during partition or passed on to the
legal representatives at the time of death. What about the volatile digital assets? For instance,
cryptocurrencies are highly volatile and not stable creating difficulty in determining their true value.
With growing digitalisation, wealth is created over the internet. What will happen when there’s a
question about the division of wealth at the time of separation? How can the digital assets be passed
on to the legal hire or representative at the time of death? This research paper aims to identify the
solution for division of the digital assets.

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INTRODUCTION
Post-pandemic the usage of digital media has increased at an unexpected rate. The world is moving
towards the era of digitalisation. The era dominated by technology has widened the concept of
wealth, which is now more than tangible assets. Wealth is created over the internet through digital
assets. The question comes into the picture what are ‘Digital Assets’? The term is not well defined
legally, which gives room for a broad interpretation. From cryptocurrencies and online accounts to
intellectual property, has not only evolved the concept of assets but also brought challenges
concerning division at times of divorce, demise or any other conflict.

WHAT IS A DIGITAL ASSET
Digital Assets are anything and everything that is stored in the digital form which can be put in to
create value. 1 Digital Assets include cryptocurrencies, e-commerce websites, social media accounts,
photos, videos, subscription accounts, NFTs, digital gold, digital documents, logos, streaming media
accounts and much more. With the introduction of blockchain, there are digital assets such as
security tokens, crypto assets, metadata, non-fungible tokens, and more. Digital assets are acquiring
importance in today’s world as they are becoming an integral part of one’s profession and personal
life. 2

An asset is a resource in the economy, which holds the potential to create value. 3 The most
important factor to determine the digital asset to be an asset, it must possess the potential to create
value. The digital assets can be purchased, gifted, or transferred to someone else bringing the value.
The digital asset must be traceable and stored.

SCOPE OF DIGITAL ASSETS
Digital assets are much more than photos, videos, logos, and e-wallet money. It has gained
popularity due to its easy access and convenience. The revolution in the digital market began with

1 Gartner Glossary, https://www.gartner.com/en/finance/glossary/digital-assets (last visited Dec. 4, 2023 10:57 AM).
2 Investopedia, https://www.investopedia.com/terms/d/digital-asset-framework.asp (last visited Dec. 4, 2023, 11:07
AM).
3  Financial statements, https://www.investopedia.com/terms/ (last visited Dec. 4, 2023, 11:14 AM).

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the introduction of blockchain and cryptocurrency in 2009. 4 Cryptocurrency became a well-
accepted digital asset as people started investing in it with an expectation of return values. With the
increasing number of internet users, the usage of digital resources has increased. Nowadays we
prefer surfing digital resources to find relevant information rather than the library as it saves cost,
and time and is convenient. 5 The digital assets are easily traceable with the help of blockchain and
distributed ledger technology (DLT). 6 The other examples of digital assets may include, Photos and
videos, Documents, Emails and email accounts, NFTs, Purchased Media accounts like
subscriptions, Gaming Accounts and Illustrations, Social media accounts like YouTube, Instagram,
Facebook, twitter, and much more. 7

WHEN IS DIGITAL MEDIA CONSIDERED AS AN ASSET?
The traditional definition of assets is defined as any resource which holds the potential to generate
revenue. 8 The assets which add no value to the business or person is not considered as an asset.
Similarly, the digital resources in which we have the potential to create value or hold some sort of
value are considered Digital Assets. For instance, a YouTube channel has one million subscribers,
bringing in brand collaborations, and generating revenue. This YouTube channel shall be treated as
an asset. Assets have two categories tangible and intangible. Tangible assets are those which are
physical (like machinery, inventory, and more), whereas intangible assets are those which cannot be
seen but felt (like trademarks, and goodwill). 9 When we look at digital resources adding or
generating value or carrying any value we can consider them as a new category of ‘digital assets’.

Digital assets can be categorised into the following: 10
Cryptocurrencies: A form of digital currency, which is a rising alternative payment method,
created using the algorithm. 11 To name few Bitcoin, Ethereum, and Dogecoin are among the popular
coins.
Online Accounts: Social Media accounts (like Twitter, Youtube, Facebook, and Instagram), cloud
storage, Gmail accounts, and many more carry financial as well as sentimental values.

4 Id.
5 Dam News, https://digitalassetmanagementnews.org/features/re-defining-the-meaning-and-scope-of-digital-assets-
part-1/ (last visited Dec. 4, 2023, 12:37 PM).
6 Deloitte, https://www2.deloitte.com/us/en/pages/center-for-board-effectiveness/articles/from-next-generation-to-now-
digital-assets/ (last visited Dec. 5, 2023, 1:23 PM).
7 Id at 2.
8 Forage, https://www.theforage.com/blog/skills/asset, (last visited Dec 5, 2023, 1:25 PM).
9 The Balance, https://www.thebalancemoney.com/tangible-vs-intangible-assets, (last visited Dec.5 2023, 4:12 PM).
10 The Motley Fool, https://www.fool.com/terms/d/digital-assets/, (last visited Dec. 6 2023, 10:20AM)
11 Oswego State University off New York, https://www.oswego.edu/cts/basics-about-cryptocurrency/, (Dec. 6 2023,
10:24AM).

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Intellectual Properties: Digital Creations like e-books, social media posts, artwork, music, and
more fall under the category of Intellectual properties. Their division and ownership questions are
increasing and creating complexities.
Virtual Possessions: These are the possessions which do not carry any material value, but are
created during interaction with a digital platform. 12 It includes subscription accounts (like Netflix,
family cloud storage, search history, music playlists, SMS, video games, and more.

THE DIVISION OF DIGITAL ASSETS
About five decades ago, situations were different, life was slow and not had to be worried about
many things. But post-2020 has created a way faster than anyone could have imagined. There are
things like breaches of data and privacy, empty bank accounts overnight and much more. When the
wealth is being created virtually, the concern regarding division of the digital assets.
Generally, during divorce, various factors like contributions of the spouse, and circumstances are
considered in the division of the assets. In a court-litigated divorce, in most cases, the assets are
evenly divided, whereas in a mediated divorce, the assets are divided as per the mutual agreement. 13
The assets carry financial as well as sentimental values, thereby requiring careful consideration. For
instance, family photo albums on smartphones or clouds, carry irreplaceable sentimental value.

In the case, Ruscoe v. Crytopia the New Zealand High Court recognised digital assets as property
which possesses the capability of entrusting. 14 The defendant was a cryptocurrency exchange
platform that enabled its users to trade cryptocurrency and levied some amount of fees for the same.
The website was hacked in 2019 and caused a heavy loss of NZ$30 million to account holders. 15
The question of digital assets being property was raised. The plaintiff argued that it must be seen as
‘intangible personal property.’ 16 The court held it as “property” as it fulfilled the following three
categories:-
Traceable Subject matter
Identifiable by the third party
Some degree of stability

12 Carnegie Mellon University, https://www.hcii.cmu.edu/project/virtual-possessions, (Dec. 7 2023, 2:45PM).
13 Collaborative Practice California, https://www.familydivorcesolutions.com/digital-assets-how-are-they-divided-in-
divorce/, (Dec. 8 2023, 12:33 PM).
14 Ruscoe v. Cryptopia, NZHC 728, 2020.
15 Norton Rose Fulbright, https://www.nortonrosefulbright.com/en/knowledge/publications/d6ea37bd/cryptocurrencies-
are-property-capable-of-being-held-on-trust-new-zealand-high-court-holds, (Last visited. Dec. 10, 2023).
16 Id.

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Cable of assumption by the third party

CHALLENGES DURING THE DIVISION OF DIGITAL ASSETS
There is an increasing dispute over the access and ownership of digital assets during divorce and
separation. The following are the challenges arising at the time of the division of digital assets:-
Identification and Volatile: Digital assets are of various types like social media accounts,
cryptocurrency, intellectual property and much more. Identifying and valuing them can be
challenging due to their volatile nature.
Jurisdictional Issue: Digital assets exist beyond the borders of a country, which may pose
challenges in determining the applicability of law.
Security are Privacy Concerns: Digital assets usually require credentials for access. Transfer of
credentials with compromise of security can be challenging. Ensuring privacy and compliance with
data protection laws during the division process is essential.
Cryptocurrency Challenges: Managing and securing the private keys is essential, as a loss of the
private keys can lead to a loss of the assets. It also has tax implications which need to be considered
during the division.

Digital Rights and Licensing: The assets which are copyrighted or software which may involve
complex licensing agreements need to be considered during division. For instance, an Instagram
page having 5 million followers, is handled jointly by the husband and wife. It is challenging to
determine the ultimate ownership during the separation of the couple.

SOLUTIONS FOR CHALLENGES DURING DIVISION OF DIGITAL ASSETS
With the rising digitalisation, it is crucial to carefully examine the digital assets and be pre-planned
for the division. The division shall be mutually agreed upon by the parties. Following are a few
strategies to deal with the challenges mentioned above:-
Create Digital Will: When pre-planning the division makes things look less complicated. Suppose
one can specify his/her wishes and who shall get which part of digital assets, the division becomes
simple. Seek advice from a legal professional for handling the information about division.
Regular Review and Updates: With the fast-evolving time, one must keep themselves updated
regarding the latest digital platform. Ensuring technical literacy of beneficiaries and family
members about the digital assets, their value and the division process.

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Licensing Documentation: Keeping a piece of detailed information with regards to the licenses
like copyrighted content and applying the usage of digital wallets and secure vaults to keep the
documents safe and secured.
Mediation: A mediator is a trained and impartial professional who resolves disputes outside the
court through discussion. 17 Consider a consultation session with a mediator to resolve the dispute
arising in the division process.
Seek Professionals: Engaging with specialists like Lawyers, Tech experts, and estate managers, can
provide ideas and guidance for specific circumstances.

CONCLUSION
Our lives are now more inclined to the digital realm. There is a continuous investment in digital
assets like cryptocurrencies, digital gold and more. The influencers through YouTube and Instagram
are earning through their millions of followers and subscribers. This has created a huge impact on
the manner wealth and assets are created. As we navigate evolve adopt digital assets and pass on the
legacies a comprehensive framework or guiding principle is much needed. Navigating through the
dispute matters regarding the volatile assets requires careful analysis. To successfully navigate the
digital revolution, it is essential to have a strong understanding of the digital landscape. To
effectively address challenges, you must make a concerted effort to communicate with both legal
and technical experts. The framework for the division of digital assets can be formulated through a
collaborative initiative of individual professionals, legal systems and financial institutions. As the
digital era is approaching, rapidly evolving everything done around us, adapting and addressing the
challenges are essential.

17 Anderson Hunter Law Firm, https://andersonhunterlaw.com/blog/what-is-a-mediator (last visited Dec. 12, 2023, 10:45
AM).