Cryptocurrency and DivorceHeather Arnold
If your marriage unfortunately breaks down, you may generally be aware that assets such as property, pensions, investments and savings will need to be dealt with upon divorce.
However, many individuals now own cryptocurrency, such as Bitcoin, and this is seen by the Court as an asset and will form part of the matrimonial ‘pot’ of finances on divorce.
What is Cryptocurrency?
Cryptocurrency is a form of digital currency that only exists electronically. It can be used in exchange for the purchase of goods and services. Popular examples include Bitcoin, Dogecoin and Litecoin.
Cryptocurrency is seen by many as an investment, with 4.4% of UK adults owning cryptocurrency. This may not seem substantial; however, this figure is up more than a fifth compared to one year ago and the popularity of cryptocurrency is ever increasing, with El Salvador becoming the first country to accept Bitcoin as legal tender as of September 2021.
It is therefore inevitable that cryptocurrency will form more of a significant part of a financial settlement on divorce in the coming years.
How is Cryptocurrency dealt with on divorce?
When dealing with financial matters on divorce, you and your spouse have a duty to provide full and frank financial disclosure and you must disclose everything that is relevant to your matrimonial finances. This would include any investments in cryptocurrency.
A value of the cryptocurrency would need to be determined and this would then be taken into account and form part of any financial settlement.
What are the difficulties in dealing with Cryptocurrency on divorce?
There are unfortunately many difficulties at present when dealing with cryptocurrency on divorce.
Firstly, the value of cryptocurrency is ever-changing and so it is difficult for cryptocurrency to be fairly valued within divorce matters. Property and cash savings can be easily valued and tend not to fluctuate too significantly in value. However, the value of cryptocurrency is unstable and for instance, your spouse’s investment could be worth £5,000 one day and then increase to £10,000 or decrease to £500 the next. It is therefore difficult for parties and the Court to determine a fair financial settlement when you could have a completely different financial situation from one day to the next.
Cryptocurrency is also unregulated, and it can easily change hands if your spouse is attempting to ‘hide’ assets. If there is evidence that your spouse has attempted to conceal assets, the Court does have the power to freeze your spouse’s assets, including cryptocurrency. Forensic experts can also attempt to trace any hidden cryptocurrency and where cryptocurrency cannot be traced, but the Court are satisfied of its existence, it can be ‘added back’ into the matrimonial financial pot.
Should your spouse not provide full and frank financial disclosure and seek to ‘hide’ assets, they will be deemed to be in contempt of Court, with possible punishment of a fine or imprisonment.
If you would like to discuss any aspect of divorce or financial matters, please do not hesitate to contact our family department who will be pleased to assist you.