Cryptocurrency and Divorce Proceedings

Written by admin

May 3, 2021

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With the emergence of cryptocurrency, it is important to take a step back and look at how this digital asset may be treated when it comes to settling your finances upon divorce.

There is no doubt that when a party to divorce proceedings holds cryptocurrency, it must be disclosed. However, the fact that cryptocurrency can be transferred by the click of a button and cryptocurrency markets are not centralised (even though they are traded via exchanges and stored in digital ‘wallets’ protected by a ‘private key’, they are not issued or backed by the government or central authorities) can make cryptocurrency more difficult to trace in the event that a party tries to hide it.

It is possible for the Family Court to make orders aimed at tracing cryptocurrency if there is evidence of its existence. For example, the Court can make orders for forensic accountants to be instructed to investigate further. Injunctive orders can be made against a party who holds cryptocurrency as well as against cryptocurrency exchanges if it is satisfied that a party who owns the currency is trying to dissipate or hide cryptocurrency to try to defeat the other party’s claim to it. Where cryptocurrency has been traced and there is evidence that it has been dissipated, it can be ‘added back’ into the mix by the Court when it comes to dividing assets upon divorce (this is also possible where there is evidence of its existence, even where it cannot be traced).

A problem for cryptocurrency is that it’s value is always evolving as a form of digital currency. It constantly fluctuates in value by virtue of its nature so it is difficult to for a court to apply realistic value when making orders settling the financial affairs of a separated couple. The proportionality of pursuing a claim against this currency must always be balanced against the likely gain.

As family lawyers, we cannot give investment advice but we are seeing a rise in the existence of cryptocurrency as assets within divorce proceedings and family law will need to adapt to the constantly changing digital landscape of currency.

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