More bitcoins are now stored outside exchanges, and courts cannot move them without the keys.
This change in custody conflicts with family law. The exchange balance is around 2.7-2.8 million BTC, or about 14-15% of the circulating supply, and is hovering around the lowest level in several years.
The rest is kept in institutional vaults or in personal wallets that can be controlled with a 12-24 word seed phrase. In divorce cases, the legal system can divide what can be proven or forced to appear in court, but self-custody changes how those work.
Courts can order disclosure, and refusing to do so risks contempt or an adverse financial judgment, but judges cannot broadcast Bitcoin transactions without the private keys.
How courts are adapting to the reality of virtual currency self-custody
The law is moving towards recognizing what technology has already made possible. In England and Wales, the Property (Digital Assets etc.) Act 2025 received Royal Assent and codified that certain digital assets can attract property rights.
The Law Commission's concept of 'data objects' underpins that change. Recognition is important for injunctions, tracing, and ownership, but it does not evoke the key.
As noted in the Norton Rose Fulbright document, UK courts have already granted their own injunctions against cryptocurrencies in the context of fraud, and the toolkit is now available for more routine disputes where assets are discovered.
Family lawyers in the UK and US, including firms like Kabir Family Law, describe strategies that start with bank and tax records, move on to exchanging subpoenas, fold in on-chain heuristics and device logs, and end with lifestyle evidence when the ledger is silent.
Ownership is no longer on the fringe. According to the FCA, the UK Financial Conduct Authority reported that as of August 2024, approximately 12% of UK adults, or approximately 7 million people, held cryptocurrencies.
Trade press and private research have put adoption rates higher in 2025, which is a helpful direction, but not a solid anchor. Even if many ownership interests are small, peripheral spouses with the strongest motivation to conceal will prefer self-custody, which avoids intermediaries.
For courts, detectability and seizability are separate. The analytics stack currently rented by subpoena becomes more robust once funds touch a KYC platform.
Border enforcement and regulatory prospects
Chainalysis' mid-2025 announcement tracked over $2.1 billion in theft, tracked the shift to stablecoins in illicit finance, and demonstrated how chain data can map flows and counterparties when exchanges and brokers enter the path.
This capacity increases the probability of detection, but does not unlock cold wallets stored offline.
Regulators are tightening the envelope. In the European Union, MiCA and the Travel Rule to be introduced from 2024 to January 2025 will standardize originator and beneficiary data when transferring money through crypto asset service providers.
The UK is moving forward with plans to formally license exchanges and dealers and bring scrutiny to the platforms where consumers interact most often.
In the US, broker reporting for DeFi will expire in April 2025, and broader crypto reporting by the IRS will not begin until 2026, leaving a patchwork in the short term. These measures strengthen the lamp, not the key.
Two protection modes explain the enforcement gap. Because custodial accounts place an intermediary between individuals and their coins, courts can freeze and seize the platform's cooperation.
Self-custody flips that model on its head.
The seed phrase definitively generates the key that unlocks the transaction, and whoever holds the phrase holds the spending rights.
Disclosure orders are binding and failure to comply may result in penalties, but refusal does not provide instant recovery. That is the practical difference that family barristers must undertake in their settlement advice today.
Market structure makes legal calculations more probabilistic. Foreign exchange balances are at multi-year lows, indicating that more assets are being managed under lock and key rather than on platforms.
The growth of ETFs has brought a further portion under professional control through multi-party management. Price targets can go up or down, but custody transitions are independent of directional demands.
If Bitcoin's off-exchange share rises another 2-4 percentage points by the end of 2026, which would be consistent with recent drawdowns, disputed litigation involving crypto-active spouses would increase the incidence of non-compliance and negotiated discounts given the risk of not getting the coins back.
Practitioners are already adapting
As the NJCPA and other expert sources explain, typical discovery currently occurs via bank statements, tax returns for capital gains tracking, subpoenas for exchange of KYC files, IP and device logs, deposit and withdrawal history, and then moves to on-chain cluster analysis.
If the smoke appears but the keys do not, the judge can draw adverse inferences and reweight other assets or award maintenance or fees to offset the concealment. This mirrors the movement of offshore cash, with the twist that Bitcoin compresses offshore-like controls into memorized phrases, leaving less of a paper trail.
Joint custody solutions are entering families' toolkits. Multi-signature wallets (such as a 2-of-3 setup) allow for shared control between two spouses and a neutral third party.
Commercial providers such as Casa, Unchained, and Nunchuk offer estate and recovery flows to the market, providing lawyers with pre- and post-nuptial templates and transferring the nuptial acquisition to a co-managed wallet with the executor or law firm as a neutral signatory.
The logic is simple. Make the policies embedded in the signature threshold “ours” and ensure that a neutral party acts only to enforce lawful orders, facilitate agreed-upon distribution, or rotate keys if they are compromised. Based on the FCA's baseline, even a modest adoption rate would cover hundreds of thousands of households in the UK and US by 2027.
Courts and policymakers also rely on sanctions enforcement intermediaries. OFAC has sanctioned exchanges and mixers that enabled the illicit flows, and these actions spill over to exchange compliance teams that respond quickly and with rich metadata to subpoenas, the U.S. Treasury noted.
As boundaries tighten, we can expect to see more evidence available from platforms, faster subpoena-to-subpoena timelines, and stronger penalties for non-disclosure.
Because none of these generate keys to purely self-custodial assets, adverse rulings, fee shifting, and contempt are the main deterrents, rather than warranting separation by transfer.
Some backlash requires clear response
“Most people store their coins on exchanges” is less accurate as balances on the platform are less than 15% and institutional storage is increasing. “Forensics makes concealment rare” applies only when funds come into contact with a broker or CASP.
The analogy that “offshore accounts already allow people to cheat” is incomplete. Because self-management eliminates banks. The UK Act 2025 provides legislation to treat digital assets as property, but the actual control is based on encryption. Courts can punish non-disclosure and Bitcoin transactions cannot be signed.
| metric | latest reference | sauce |
|---|---|---|
| BTC on the exchange | Approximately 14-15% of supply, approximately 2.7-2.8 million BTC | coin glass |
| Cryptocurrency ownership for UK adults | As of August 2024, approximately 12% (approximately 7 million adults) | FCA |
What happens next is divided into four paths that practitioners and clients need to price. First, the key is in favor of the courts in the sense that the higher the off-exchange share, the more likely non-cooperation turns into contempt or discounting rather than immediate recovery.
Second, the platform extends its boundaries as EU and UK regulations and 2026 US tax reporting increase visibility every time a coin touches a broker. Third, norms of joint custody will emerge, with multisig and escrow key shards in prenuptial documents and wills, allowing families to share control and ensure inheritance without leaving seed phrases on public record.
Fourth, the forensic arms race continues, and while lamp detection improves, void vaults remain opaque unless someone pitches in.
The policy lens remains transnational. Capital controls and sanctions gain influence through intermediaries, and MiCA and Travel Rule data standards create a more uniform paper trail within the regulated sector.
None of these measures diminishes the ability of individuals to move value across borders through self-management. That's why courts continue to rely on remedies that change incentives rather than transactions, and why family lawyers continue to ask for logs, receipts, and OSINT when the ledger is silent.
If there's one sentence that captures this moment, it's that regulation is not the key, it strengthens the ramp.
For divorce courts, that means settlements that assume the coins are found where the platform is touched, and relief that assumes they are immovable if they are not.
The key determines what can be split.
