Senior solicitor Rebecca Ledgerwood, in our Family Law team, explains how cryptocurrency and other crypto assets are treated in a divorce.
Crypto assets are becoming increasingly common. The term ‘crypto assets’ encompasses all electronic assets including crypto-currencies, crypto-arts and so on.
Within the context of divorce proceedings and the resolution of the family finances, financial disclosure of both spouses ought to be provided. Full and frank financial disclosure obligates spouses to provide details of all assets and liabilities that they have an interest in, wherever in the world they may be held. This duty includes disclosure of any crypto assets.
When disclosing crypto assets, the holder should disclose (i) a copy of their account history on the software/hardware wallet, (ii) a copy of the local wallet and (iii) login details to ensure verification of ownership and the holding. It is beneficial to provide as much detail as possible to ensure that the non-owner spouse, together with any lawyers instructed, fully understand the asset and can review the value. This is particularly important given the volatile nature of the value of crypto assets.
If a spouse fails to disclose crypto assets this is likely to be viewed as a material non-disclosure by the Family Court. The Court can penalise the spouse by way of a costs order and in extreme cases, it may be grounds to overturn a financial order. Given the nature of the asset, tracing crypto assets is potentially difficult if there has been a non-disclosure. However, examination of bank statements, investment accounts and so on may provide important information that suggests a spouse does hold crypto assets. For example, if there is a transaction to a crypto exchange platform such as Coinbase.
Under English law, crypto assets are be treated as Property and therefore crypto assets can be divided, transferred or sold as part of a financial order. If a party is ordered to transfer crypto-assets to their spouse but fails to do so, the Court may take enforcement action by offsetting against another, secure or tangible asset i.e. a property or funds held in a bank account.
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This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.