In the first part of a two part blog we look at the legal issues surrounding cryptocurrencies in divorce and separation. The second article will look at the issues encountered after death in administering an estate that contains cryptocurrencies.
With the advancements in technology over the past few decades, we have seen significant changes in the way we work and communicate. Emails have replaced the ‘snail mail’ postal system, faster internet speeds allow companies to create remote working teams, and video conferencing has now become a preferred method of face-to-face contact in light of Covid-19.
The introduction of a virtual currency has gone on to further develop the way in which business is conducted and how transactions are carried out. These currencies may, however, be subject to division following a marriage breakdown.
Our Family Solicitor, Megan Milburn, explains how cryptocurrencies can impact financial settlements in the context of divorce proceedings.
What are Cryptocurrencies?
Cryptocurrencies, such as “Bitcoin”, are virtual currencies that allow money to be transferred anonymously without the control of a regulating body, such as a bank.
The currency has no physical presence, and new units and transfers are recorded in a distributed ledger called a “blockchain”. The blockchain is stored on various computer systems around the world which are accessed using a virtual “key”. Keys are stored in a digital “wallet”, and only those with access to the key can manage their cryptocurrencies.
Transfers of currencies are identified by a series of letters or numbers called an “address” rather than by name, which can make tracing specific transactions difficult.
Are Cryptocurrencies considered a form of property in legal proceedings?
Cryptocurrencies are different to other types of property as they are virtual. The asset cannot be possessed physically, but a person can possess access to the currency. While there are no current legal authorities in the Family Courts that define cryptocurrency as property, previous cases in England and Wales have determined that it should now be considered a form of property capable of being subject to various court orders.
Cryptocurrencies in matrimonial proceedings
In the event of marriage breakdown, it is advisable that you seek legal advice in relation to the commencement of divorce proceedings and the division of the matrimonial assets.
These assets need to be considered and divided in order to meet yours and your spouse’s needs. Where there are enough assets to meet these needs, the courts will also consider any financial contributions made by either of you during the marriage in determining a financial settlement.
As cryptocurrencies are considered a form of property, they are an asset that will form part of the matrimonial pot. Therefore, cryptoassets are an available resource that can be divided as part of any financial proceedings.
Problems may arise in obtaining the required financial information of cryptocurrencies, as without control of the data there is no access to the asset. It may also be difficult to trace certain transactions, as well as place a value on cryptocurrencies for the purposes of the proceedings as they are different to regular currency. We will be able to advise you on how to manage these circumstances and assist with the instruction of relevant experts.
Can I protect my Cryptocurrency?
Like any asset, cryptocurrency can be included as part of any pre-nuptial or post-nuptial agreement. These are legal documents which allow you and your partner to agree a fair financial arrangement between you in the event of a relationship breakdown.
Do you need our help?
If you own digital assets and require any assistance regarding pre or post nuptial agreements or in relation to a relationship breakdown, please feel free to contact us today.
