Background
"Water is a useful metaphor for digital assets; they are just as fluid, ever-changing, and dynamic, which presents both challenges and opportunities for executors and those who provide services to them. And, like water, digital assets can simply slip through one's fingers without care"
- Daniel Nelson, "The Challenge of Digital Estate Administration for Executors"1
In storing personal information or creating content on the Internet, individuals are storing or producing digital assets.2 These digital assets are important personally to personal identities, and financially, as online loyalty programs, virtual currencies, and content stored on sites such as Amazon and iTunes are becoming as valuable as online bank and investment accounts.3
Bitcoin market cap reached US $1 trillion in February 2021. A report by a 2021 study estimates that 1.2 million Canadians (3.2%) hold Bitcoin.4 Yet, BMO Wealth Institute finds over 57% of Canadians have failed to plan for their digital assets in their estate plans.5
Wealthsimple now offers 34 different cryptocurrencies on its investing platform. Some popular ones include6:
Etherium
Etherium is a blockchain network like Bitcoin. It can also be used as an alternative currency, but fewer vendors accept Etherium. Etherium is better known for its smart contracts - computer code that automatically executes the contract when the terms of the agreement have been met without the need for human intervention. Ether is the currency used to pay to run programs on the Etherium network.
Litecoin
Litecoin is another decentralized cryptocurrency that adopts many of Bitcoin's features, in fact its founder announced that Litecoin would be the "lite version of Bitcoin" and the "silver to Bitcoin's gold". Litecoin has faster transaction speeds and because of this its platform handles more transactions.
Ripple
Ripple is also a blockchain driven platform but its focus is on facilitating cross-border transactions in just a few seconds, which is much faster than the hours or days it might take a bank. Ripple's XRP coins are intended to be a linking currency between the two international currencies involved in the transaction.
Cardano
Cardano is an "Ouroboros proof-of-stake" cryptocurrency that was created with a research-based approach by engineers, mathematicians, and cryptography experts. The project was co-founded by Charles Hoskinson, one of the five initial founding members of Ethereum. After having some disagreements with the direction Ethereum was taking, he left and later helped to create Cardano.
The team behind Cardano created its blockchain through extensive experimentation and peer-reviewed research. The researchers behind the project have written over 90 papers on blockchain technology across a range of topics. This research is the backbone of Cardano.
Dogecoin
Dogecoin is seen by some as the original "memecoin" caused a stir in 2021 as the price of the coin skyrocketed. The coin, which uses an image of the shiba inu as its avatar, is accepted as a form of payment by some major companies including the Dallas Mavericks, Kronos, and, perhaps most notably, SpaceX, an American aerospace manufacturer owned by Elon Musk.
Dogecoin was created by two software engineers, Billy Markus and Jackson Palmer, in 2013. Markus and Palmer reportedly created the coin as a joke, commenting on the wild speculation of the cryptocurrency market.
The price of DOGE hit an all-time high of $0.71 during the week Elon Musk was scheduled to appear on Saturday Night Live. As of November 2021, Dogecoin's market capitalization is $29.2 billion and one DOGE is valued at around $0.22, making it the tenth-largest cryptocurrency.7
Non-Fungible Tokens (NFT)
Additionally, Non-Fungible Tokens (NFT) have expanded into other asset classes. A Non-Fungible Token is a token stored on a blockchain. Blockchain itself is a secure distributed database with redundancy, immutability, and clarity into tracking data or ownership. A token proves ownership of an asset. For just like a deed to your house is a sign of ownership to that plot of land and building, in the case of the first digital token, Bitcoin, a single Bitcoin is the title of ownership to the underlying value of the Bitcoin.
As mentioned in a Thomson Reuters article8, Mike Winkelmann, known as @Beeple, is a renowned artist who has worked with Nike and Apple Winkelmann. Winkelmann sold a collection of many of his works combined into a masterpiece, titled EVERYDAYS: THE FIRST 5000 DAYS at Christie's for $69 million. These transactions occurred on Ethereum, a blockchain.
Winkelmann's art itself was simply digital images, however people buy NFTs because it is feasible to collect royalties and resell the NFT in the future for profit.9
As digital assets become increasingly more mainstream serving as a form of alternative investment for many people, the need to protect those assets and have a strong succession plan in place is increasingly important.
It has been observed,10 that disputes over digital assets are likely occurring but because mediation in Ontario is mandatory and confidential in estate litigation, the resolutions are not publicly reported. Having a digital estate plan is crucial to ensure that a testator's wishes are adhered to.
Defining and Categorizing: Assets vs. Accounts
The categories of digital property are fluid, since digital applications, social media sites, and currencies spring up and are popularized every day. Further complicating classification is the issue of determining whether individuals have a license to use a digital asset or if they possess a full property ownership interest. The first step is to differentiate between digital "assets" and digital "accounts".
While an asset typically refers to a singular file itself, accounts generally refer to the mechanisms used to control and access certain assets.11
A 2013 Law Society of Upper Canada article helps distinguish between the two:12
Digital Assets
The definition is endless, but digital assets may include photographs, videos, blog posts, iTunes music collections, emails, Microsoft Office documents, music collections or...
