Cryptocurrency and divorce: a new asset that makes life and separating a little more complicated

Cryptocurrency, such as Bitcoin and Ethereum, is in the news on a daily basis. More and more people are investing in these alternative assets, as well as NFT artworks and tokens. But what happens when these assets are held by one person in a marriage? What part do they play in the settlement agreement of a divorcing couple?

Cryptocurrency and divorce issues.

The division of assets and debts (for example, a mortgage) is all part of the divorce settlement process. It takes into account wealth generated before the marriage, during the marriage and even after the marriage.

It can be a very complicated area, with property, pensions, ISAs, properties and inheritances, school fees and loans, all coming under scrutiny.

The addition of cryptocurrency has made the process even more complicated.

This is because it is an unregulated area, where assets are generally hidden from view and are often in the hands of one person, rather than the couple.

It can also be the case that their value can increase substantially over time, something of which the holder is aware, but the other person is not.

Clients should ask their partners about cryptocurrency.

When we work with a client, it often happens that they only partially know what assets their spouse or partner has.

When they mention crypto assets, it might be they know their partner has talked about them or has an App on their phone, but does not know what assets there are in particular, e.g. Bitcoin or Ethereum or what the value might be.

It is often the case that one person does not know what the value of a pension is or what money goes on the mortgage each month, so knowing what Bitcoin a partner has is very rare!

Cryptocurrency and hidden assets in divorce.

If the assets look like they may be hidden there are some investigations that can be made, for example, looking at bank accounts, (as Fiat or “real” currency is usually spent to buy crypto assets.) We can also look at what websites have been visited by our client’s partner.

This is particularly useful as crypto assets can also include digital assets such as NFTs (non-fungible tokens) which are not traded on crypto currency exchanges such as Coinbase or Binance.

Crypto assets are not just coins or tokens. They can also be works of art, or high value videos, memes and trading cards for example.

Hiding assets is not legal in a divorce.

The divorcing couple must disclose their assets. And whilst crypto assets are more easily hidden, it is not as easy as people think to hide them from a good solicitor.

Even if you hold crypto assets and say they were stolen, or hacked, you would have to prove this, which can be very complex.

Cryptocurrency and asset value volatility

One of the major issues with crypto is its volatility.

The value can go up and down on a daily basis by 20% or more. This is why it is usually better to go for a percentage split rather than a monetary value when deciding on who will get what.

In any case, the negotiations of the whole settlement might involve trading some crypto percentage for a percentage of a stable asset, such as a holiday home. But if you know what there is, then you can get to the right agreement, both parties willing.

Choose a solicitor who asks the right questions

With the explosion in cryptocurrencies, it is very likely that more and more solicitors will find themselves dealing with these assets, both in divorce and probate areas of law.

No doubt, the law will evolve to take them into account, as at the moment, the judicial system is playing catch up. There is no real case law in this area.

Prenuptial agreements and cryptocurrency

If there is a prenuptial agreement, it may be that crypto assets will not form any part of the divorce settlement. (A prenuptial is always a good idea if you have assets before you get married that you want to keep in the event of a separation.)

For example, if you had married someone in 2015 and you had 1000 Bitcoin at the time, that would now be worth £25M.

When it comes to separating, you would want to ensure you kept your Bitcoin, which was a premarital asset. A prenuptial would have been a good thing to have in place.

Cryptocurrency and the division of assets

Whilst there is no specific crypto asset law in the Matrimonial Causes Act, this law does look at how the assets in total are divided.  Cryptocurrencies and assets like NFTs are included in the general division of assets.

Even if a client of ours has assets in cryptocurrency and asks us to “hide them” we have to advise them that hiding them is against the law!

It is always a unique set of circumstances with each client; but the best type of divorce is one that is agreed by both parties as being fair, and that includes full disclosure.

Finding the right lawyer to deal with your divorce

Not all solicitors are comfortable dealing with cryptocurrency as it is relatively new. However, as solicitors, we have to make sure we understand how it works, how it is traded and how it can be hidden.

Do you need a divorce solicitor in Reading?

When you are looking to separate or divorce and you think your partner may have cryptocurrency assets you can always call us for advice. We deal with family law, and specialise in divorce and financial settlements.

If you would like further information on this article or to find out your options, please contact our Family Solicitors, Aadil Khan or Anthony Raumann on 0118 9589711 or email [email protected]. Aadil and Anthony offer a one-hour confidential fixed fee meeting at our Reading office for £95.00 including VAT.

Further Reading:

Government Eases COVID Rules on Residential Possession

Are school fees included in child maintenance payments?

Parental Alienation – what is it and how you can you identify it?

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