As if the financial issues relating to family law proceedings were not already plagued with an expansive list of difficulties and complications, the emergence and popularisation of cryptocurrencies over recent years has done anything but quell such obstacles.
As we move further into 2018, it is increasingly likely that you will have heard of virtual currencies such as Bitcoin and Ethereum, which continue to present new difficulties for lawyers dealing with the already difficult process of dividing a couple’s assets within the context of divorce proceedings. Although Bitcoin is almost a decade old this year, the global rise in interest associated with cryptocurrencies in general has recently forced lawyers working within areas such as family law and wills and estate planning to take heed of these digital assets.
In short, cryptocurrencies are self-contained systems which allow users to exchange and transfer currency without the use of a central bank. Each individual unit (piece of digital currency, or ‘coin’) acts like data moving around within a network. Units of a cryptocurrency range in value, being worth between $0.01 – $100,000’s, and cryptocurrencies are subject to neither bank fees nor charges (one of the key motivators behind their initial emergence).
In dealing with these new forms of currency, the overarching complication for lawyers and Judges alike is that cryptocurrencies are held in a ‘digital wallet’, which effectively works in the same way as a physical wallet. This means that only the owner of the currency is privy to where it is held, with access only being possible through the utilisation of a unique digital code. Similar to the use of a physical wallet, or even likened to a person hiding physical cash, only the digital wallet’s owner knows exactly where the money is kept, unless they decide to share this information.
Throughout family law proceedings, each party has a duty to provide full and frank disclosure of their assets and liabilities. Unfortunately, the intentional anonymity of cryptocurrencies complicates this process, as the assets are traded online or simply purchased directly from a bank account rather than being tracked through those institutions which the Court normally deals with.
Cryptocurrency can also be moved offline and traded, in turn making the location and value even more difficult to track, particularly if the Court is unaware of the unique code for that currency or where it was originally purchased.
In circumstances where parties are reliant on disclosure (or external resources to track down any assets that have been hidden from the Court), Jo Carr-West, a partner at London-based firm Hunters Solicitors has rightfully pointed out, “It’s creating another layer of distrust that we haven’t had to deal with before“.
In today’s digital age, a significant portion of an individual’s assets may be tied up in cryptocurrencies, and those working within family law are having to rapidly familiarise themselves with this system in order to ensure that cryptocurrency is appropriately viewed and divided. Identifying and subsequently valuing cryptocurrency assets is imperative to ensure that all assets are disclosed and considered in any division of property within a family law matter.
As cryptocurrencies are relatively new, precedent providing guidance on how the Courts should handle these cases is yet to be set. With cryptocurrencies increasing in popularity each and every day, it is anticipated that these new forms of digital currency will continue to pose issues within the realm of family law.
If you have a question regarding any of the above, or have a specific query with regard to cryptocurrencies and your particular family law dispute, please don’t hesitate to make contact with one of our Accredited Specialists in Family Law or simply contact:
