The rise of digital assets like cryptocurrencies and non-fungible tokens (NFTs) has introduced new complexities in divorce proceedings.

These assets present unique challenges in identification, valuation, classification and enforcement, requiring legal professionals and often those they represent to adapt.

Digital assets present identification challenges, especially cryptocurrency and NFTs can be hidden or transferred across platforms, making them difficult to detect.

Since these assets are often stored in private digital wallets, spouses may attempt to conceal them. In English law, full financial disclosure is required during divorce proceedings, but identifying these assets often requires forensic experts with blockchain expertise.

Despite their expertise, experts may encounter valuation issues, as assessing cryptocurrencies like bitcoin or ethereum is complicated by their volatility.

The value of NFTs, being unique and market-dependent, is equally challenging to assess. Expert appraisers familiar with digital markets are essential to determine the accurate value of these assets during divorce negotiations.

English law typically views assets acquired during the marriage as marital property, whereas those obtained before the marriage may be separate, unless commingled with marital funds. This applies to digital assets as well, cryptocurrency or NFTs purchased during the marriage are generally considered marital property, even if held in one spouse’s personal wallet.

Cryptocurrency can be directly transferred between digital wallets, making equitable asset division relatively straightforward. However, NFTs, being non-fungible, cannot be split in the same way.

In such cases, one spouse may retain the NFT while the other receives equivalent compensation in other marital assets such as cash or property. This alternative is preferable when market volatility or valuation challenges make direct division impractical.

Spouses should be aware that capital gains tax may be triggered if digital assets like cryptocurrency or NFTs are sold during divorce proceedings. This is particularly relevant if their value has increased since acquisition. NFT royalties, if applicable, should also be considered in the division process, as they can affect the overall value of the asset.

An additional challenge lies in enforcing court orders for digital asset division. Cryptocurrency transactions are typically irreversible, and digital wallets are difficult to trace. While English courts can issue orders, enforcing them may require blockchain experts, especially if assets are hidden or transferred.

Both spouses and legal professionals must approach digital asset division with caution. For example, a spouse should ensure that they fully disclose all cryptocurrency accounts or digital wallets, just as they would with traditional bank accounts.

Legal professionals, on the other hand, must be able to gather evidence to determine the value of these assets, just as they would assess the value of a property or a portfolio. Digital assets cases benefit from bringing in an expert early on to ensure that the division is both accurate and fair.

As digital assets gain prominence, particularly cryptocurrencies like bitcoin and ethereum as well as NFTs, there is an increasing need for clearer regulations in English law to ensure their fair division in divorce cases.

Blockchain-based smart contracts, commonly used in decentralised finance platforms, may offer a future solution by automatically executing agreements, ensuring the equitable division of digital assets without the need for additional work or disputes in divorce settlements.

However, the division of digital assets presents new challenges for English family law, requiring legal professionals to stay informed, ensure full disclosure, engage relevant experts, and consider the tax implications. As the legal landscape continues to evolve, a more defined approach to the division of digital assets is likely to emerge, promoting fairness and clarity in divorce settlements.

While many individuals who hold such assets are innovative and do so for commercial gain, there are unquestionably dishonest and unethical individuals who have taken a strong interest in them.

These individuals can present significant challenges for divorce courts, often complicating asset tracing and legal proceedings with their evasive tactics.

This article was first published in The Financial Times in March 2025.

Disclaimer: The information on the TV Edwards website is for general information only and reflects the position at the date of publication.