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Cryptocurrency & Divorce: How Digital Assets are Divided in Family Law

April 11, 2023 By Steven Bain Family Law

One of the main processes that a Family Solicitor will be working towards on your behalf when you divorce is the division of your matrimonial assets.

Whilst the actual process of division may not always be straightforward, it is usually reasonably simple to obtain the information required on the value of the assets.

Whether this is consulting a surveyor for a property valuation, checking the stock exchange for the value of shares, contacting pension providers for valuations, or asking a bank for statements, the information is relatively easy to obtain, and certainly, with things like stocks and shares, or bank accounts, there are central registers where all this information is stored, and can be accessed.

It has long been one of the draws of Cryptocurrency that transactions remain largely anonymous, and information on a person’s holdings is highly limited. In fact, there is no obligation for the holder to have a name or address associated with their holdings at all. This makes the job of the Solicitor looking after your fair division of assets extremely tricky, but not impossible.

A further complication comes from the highly volatile value assigned to Cryptocurrencies. Unlike standard banking, Cryptocurrency is not based on the value of items such as gold and silver. A single Bitcoin (the most well-known Cryptocurrency) is only worth as much as someone is willing to pay for it, and these values seem to be fairly arbitrary in nature, however, the same could be said for things such as gold and silver before we decided these would be classed as precious, and attract a high value. The main difference is that gold and silver are physical things you can hold in your hand, unlike Bitcoin.

In 2010, one single Bitcoin was worth $0.09. In 2013 this spiked at $1,238, before slumping to $315 at the start of 2015.

By December of 2017 a single Bitcoin was worth $19,345, then by December of 2019 value was back down to $6,635.

November of 2021 saw Bitcoin’s all-time high, with a value of $65,496. 6th July 2022 saw Bitcoin value at $20,048.

After Bitcoin’s first big value spike in 2017, it began to become more mainstream and viewed less like something that only had a use for people trying to hide their activity. Bitcoin was in fact designed to short-circuit corruption, as its inventor believed that centralised groups such as bankers, or governments should not hold the ability to manipulate wealth for their own ends, highlighting corrupt governments as a trigger for its invention.

As you can see from the snapshots in Cryptocurrency history above, the value is volatile, to say the least. This in turn makes valuations at the relevant dates somewhat difficult when you combine the anonymity of transactions with the ever-fluctuating values, but all is not lost!

Users will have some form of Cryptocurrency wallet which will be used to hold the asset, and it is requesting vouching for this that can act as your starting point.

The next place to look for traces of assets are trading platforms. Standard currency would need to be transferred onto a Crypto trading platform of some kind (known as a Crypto entry point), and this can give you your first clue that a person holds some form of Cryptocurrency. Likewise, the Cryptocurrency may be “cashed in” at some point, i.e. transferred back into standard currency (exit point), and this is another clue that can be taken from standard vouching (the term given to evidence of assets) in the form of bank statements. These trading platforms keep records of transactions and this can aid in trying to follow if a person has liquidated some of their crypto assets, and where those funds were then transferred out to.

Accountants have not been oblivious to the trend of investors holding Cryptocurrency either, and forensic accounting techniques are ever-advancing to allow Crypto to be traced and valued more accurately.

So in essence, just because Cryptocurrencies are not a physical “thing” you can hold in your hand, this does not mean it shouldn’t be considered in separation. It very much should, and can often hold a high value for the parties involved.

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