Cryptocurrency Assets & Divorce
The prevalence of cryptocurrency today cannot be under-estimated. From NFTs to Bitcoin there are so many options for convenient investment. This rapid increase in prevalence has brought issues for many areas of law. This article will particularly focus on the problems raised by cryptocurrency assets in final settlements of divorce.
What is cryptocurrency and should it be considered in divorce cases?
Cryptocurrencies, such as Bitcoin or NTFs, can be challenging as it is difficult to determine their value. They are, by nature, highly volatile and challenging to trace, let alone accurately value. Although, it seems clear that cryptocurrency is a valid asset in divorce cases since it’s been recognised as ‘property’ in England and Wales. Subsequently this means crypto assets can be transferred between parties via a property adjustment order under s.24 of the Matrimonial Causes Act 1973.
Why is cryptocurrency problematic for distribution in divorce cases?
Cryptocurrency assets have raised lots of issues in the process of divorce settlement due to their unregulated nature, high volatility and potential for anonymity.
Unregulated
A concern about cryptocurrency, in a general sense, is that they are unregulated by the government or central banks unlike conventional investments such as premium bonds and ISAs. This can encourage money laundering, tax evasion and other forms of illegal trading.
Unpredictable
Although more conventional investments also fluctuate in value, crypto assets are even more unpredictable, and capital can be lost easily. This is problematic for divorce cases where one spouse holds a large sum in a crypto-wallet which loses significant value. However, as crypto assets are treated as a form of property, courts can be willing to issue a freezing injunction or an order to transfer the sum to an alternative wallet in cases where there is a threat of dissipation to the asset.
Privacy and anonymity
The biggest concern about crypto assets in divorce cases is that money is difficult to trace. There is no requirement for a person to use their real name or a valid postal address in order to set up a crypto wallet. This can be taken advantage of since a spouse can invest money without the knowledge of their partner. Of course, once divorce proceedings are in place, each spouse will have to complete a form E and have a duty to be full and frank in all financial disclosures. The potential for anonymity with crypto assets is problematic as it makes it easier for a spouse to hide these investments. The secretive potential of cryptocurrency makes it of vital importance to seek advice from experienced legal professionals to ensure fairness in any final settlement.
While cryptocurrencies like Bitcoin clearly do have some issues, for the most part they are good at helping people access investing who may have not previously had access or knowledge. The fact that courts are willing to accept crypto assets as property shows the importance of the law keeping up with societal developments. Ultimately the challenges posed by cryptocurrency in divorce finance proceedings clearly signals the vital importance of instructing a good solicitor to ensure a fair and just action plan is in order.
