Three Tips to Dealing with Cryptocurrency in Divorce
21st December, 2021
Following the birth of Bitcoin in 2008, the world of cryptocurrency has rapidly developed, continuing to influence and shape changes in other well-established industries. The legal industry is no exception to this, with cryptocurrency becoming a relevant topic of discussion within divorce settlements.
Cryptocurrency is viewed as an asset in divorce and financial proceedings, and as it is becoming more mainstream, the consideration of cryptocurrency assets in divorce and financial proceedings is arising more frequently.
So, if you are wondering how to navigate cryptocurrency assets in a divorce, be sure to keep reading.
People going through a divorce tend to assume their ex-partner is hiding assets. The financial disclosure stage of a divorce process aims to alleviate those concerns, as both parties have a duty to provide full and frank disclosure of their finances. Questionnaires can be raised to expose concealed resources and Court Orders can be obtained against those who refuse to produce information.
Nevertheless, cryptocurrency poses a new challenge in this area. Part of the appeal of many virtual currencies is the security. Unfortunately, that can pose issues of traceability and the anonymous nature of cryptocurrencies can make cryptocurrencies seem appealing for spouses wishing to hide money from a partner.
This does not mean you should try and conceal your cryptocurrency within divorce proceedings if you are the owner of it. Divorce lawyers are alert to the presence of cryptocurrency and can employ numerous tactics to unearth hidden assets. Concealing these assets will only ensure you are looked at unfavourably by the Court later down the line. Even if your spouse does not understand what it is that you have, he/she will most likely know you have invested in some kind of cryptocurrency. People often forget what they told their partner while they were married.
This is why when dealing with cryptocurrency in divorce you need a lawyer who asks the right questions from the outset.
Once discovered, the cryptocurrency needs to be valued. As with any other asset involved in a divorce settlement like a house or a business, there must be a figure placed on the cryptocurrency to assist the settlement negotiations.
Unfortunately, cryptocurrencies are inherently difficult to value as their price is highly volatile. Many factors can drive these price fluctuations and uncertainty of the future value of these assets can prove to be a difficult asset to devise in your divorce.
As the price of cryptocurrencies can vary wildly within the course of a divorce, although a partner could have built up a substantial crypto fortune when filing for divorce, it may have diminished by the time of settlement and vice versa.
Experts can be instructed to ensure the valuation you are utilising within your settlement negotiations is fair and impartial. This is vital for both sides – an inaccurate valuation will lead to an unfair settlement.
This is why when dealing with cryptocurrency in divorce you need a lawyer who knows when the assets should be valued.
Cryptocurrencies should not be dismissed within settlement negotiations and they are assets of which the Court has the power to transfer ownership in divorce.
Due to the valuation issues, it may be fairer for the cyptoassets to be split equally on divorce so that each party to the marriage has to take their chances selling on an exchange. It is, however, entirely up to the parties if they can reach a voluntary agreement without the involvement of the Court and it may be that one party would prefer to retain the risk-laden assets.
If cryptocurrency is being transferred, careful consideration must also be given to the information required by the receiver so that they can access the asset. Transferring cryptocurrency is not as easy as transferring money or property. Steps need to be taken to ensure all the necessary information is provided to the transferee without compromising the security and privacy of the transferor.
Pending and following the final settlement, you will also need to consider what happens to your cryptocurrency if you are to pass away and who receives the ownership of these assets if your divorce isn’t yet finalised. Since cryptocurrency is decentralised, survivors can’t just access it by calling a bank. So, you must ensure that your Will has sufficient instructions on how your loved ones can access them.
This is why when dealing with cryptocurrency in divorce you need a lawyer who understands your needs and the risks.
Many people switch off when they hear the word cryptocurrency because they simply do not understand what it is, even those who have invested in it. This is not sensible if you are going through a separation and you must seek expert advice to ensure that your divorce settlement is fair.
Not only does Ward Hadaway have expert divorce lawyers who have experience in dealing with cases involving cryptocurrencies, but there are also a host of other cryptocurrency experts who our lawyers have access to, to ensure your matter is dealt with effectively and pragmatically.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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