Today’s blog post was written in collaboration with Adele Ambrose – Student-at-Law at Fasken.

It has become clear that the “wait and see” approach to digital assets and digital currency has now shifted to a need for prudent guidance and action by advisors and institutions. According to CoinMarketCap, the total market capitalization for all cryptocurrencies is just under 1 trillion and in 2021 it was at 2 trillion dollars. Though volatile, digital assets/ tokens have garnered measured stakeholder buy-in. In a BNY Mellon study 72% of institutional asset managers responded that they planned to develop solutions for asset tokenization. A token is essentially a proxy for an underlying asset – it can be digital but may also be a tangible asset.

According to the Bank of Canada, between 2020 and 2021 the number of Canadians holding cryptocurrency rose from 5% to 13%, and back in 2017 experts estimated that by 2020 Canadians would own digital assets online valuing approximately $10,000. In a recent survey by the Bank of Canada, half of Canadian Bitcoin owners used a cryptocurrency exchange or mobile app to access their account.

That being said, a question we must ask is: who is owning the assets? While Gen Z and millennials are increasing their digital asset holdings every year, as digital assets become more accessible (e.g. through simple mobile apps) even those who aren’t “techies” may find themselves owning digital assets. This creates a need for timely guidance on holding and accessing digital accounts/holdings/assets in an emergency situation (i.e. incapacity) as well as upon death. Given our growing reliance on digital economies across all generations, digital estates may hold significant monetary (and possibly sentimental) value.

Yet, there are numerous stories on access issues when managing digital assets / accounts after a loved one’s death, the picture is murky at best. As described in the blog series Estates Law and Privacy Law: An Incomplete Intersection (Part I), Apple denied an Ontario widow access to an account jointly held with her deceased husband. In another case a widow was asked to produce a court order to gain access to an Apple ID used by her late husband.  Extrapolating these scenarios to accessing digital wallets, crypto exchanges and cloud accounts, the potential for an explosion of ghost digital assets and lost digital estates/empires is sobering.

Client Considerations and Legal Considerations Must Go Hand-in-Hand

The aforementioned blog series summarizes the relevant legal considerations in this area, including but not limited to:

• privacy legislation and the legal disclosure of an individual’s personal information by an institution;
• estates laws and our traditional understanding of “property”;
• terms of service agreements proffered by online service providers or digital custodians that purport to impose obligations on their users;
• taxation of digital assets;
• intellectual property considerations; and
• interjurisdictional considerations.

Yet, what is equally as important as the legal considerations are the client considerations: who they are, what they do, what digital assets they own and how familiar they are with technology management and hygiene.

The legal, technical and practical implications of administering digital estates are addressed in Digital Asset Entanglement: Unraveling the Intersection of Estate Laws and Technology by Sharon Hartung, P.Eng. and Jennifer Zegel, Esq. Digital Asset Entanglement highlights the challenges of executing client wishes pertaining to digital assets, particularly with respect to the numerous different types of estate administration issues that may arise.

The book focuses on the notion that client account use varies from the purely personal to full-scale business functions, and the importance of understanding the client’s technological behaviours and usage for the purposes of both estate planning and administration. The authors discuss the breadth of different types of online users and the need for bespoke estate planning approaches by identifying distinctive “Client User Personas”, namely:

• Basic Users
• Super Users and Tech Support
• Gaming and Entertainment Users
• Digital Platform Economy Users i.e. Etsy Store Owners
• Small Business Owners and Content Creators
• Tech Innovators and Nomads

The legal, technical and practical implications attached to digital estates make it likely that a personal representative or fiduciary will encounter significant challenges in administering such digital estates. Therefore, these six personas can act as helpful guideposts to professionals trying to understand the possible digital assets/accounts their specific clients may hold, and how to address them from both an estate planning and administrration perspective.

In this two-part series, we will go into further detail about the “Client User Personas” that Digital Asset Entanglement examines with a focus on technical management and legal planning considerations for each.

Thank you for reading!