From Bitcoin to Ethereum - Cryptocurrency on Divorce

Do you know your Bitcoin from your Polkadot? Ethereum from Dogecoin?

Mysterious and simply folly for many, yet sources of vast wealth for those willing to take a less conventional approach to their personal finances, cryptocurrencies are rarely out of the news, and last month was no exception.

The markets have been particularly volatile, perhaps unsurprisingly so; their values are highly sensitive to seemingly innocuous tweets from the certain individuals (step forward, Mr Musk).

With a clear increase in popularity, what are some of the key considerations for parties and practitioners dealing with these currencies in the event of a divorce?

Parties to financial proceedings on divorce are under an obligation to disclose their assets and financial resources. This will also include any and all cryptocurrencies.

However, being digital assets held in a digital ‘wallet’, they are by their very nature more obscure than traditional financial assets or investments.  Ownership is complex and rather than cryptocurrency owners being identifiable by name in the traditional sense, the data is instead coded and linked to an address to which there is a ‘key’.

So whilst a cryptocurrency should be disclosed as a financial resource in proceedings, for those who do not, they are less easy to discover (or even be aware about) – perhaps an attractive proposition for a nefarious party who is willing to risk the wrath of the court by trying to keep assets out of reach.

The volatility and unpredictability of the value of cryptocurrencies make it more difficult to ascertain a realistic value as this article demonstrates: “The price of bitcoin returned above $40,000 on Wednesday, marking a big recovery from Sunday when it was trading at just above $30,000 - less than 50 per cent of its all-time high from April.”

This makes it extremely difficult for parties and practitioners alike when it comes to reaching financial settlements. How can you be sure the value ascribed to that asset on the day you reach an agreement will remain consistent in the following days, weeks and months?  It could change dramatically from one hour to the next.  It means these currencies will no doubt cause a big headache for judges in court, and concerns in relation to enforcement particularly if cryptocurrency forms a significant part of the available resources. 

Whilst the longer term future of cryptocurrencies is as uncertain as their value, there can be no doubt they are becoming increasingly prevalent in divorce proceedings – so lawyers better start getting to know their Ripple from their Cardano …