In parallel with the world’s rapid adoption of cryptocurrencies, there is a growing surge in the number of divorce cases involving digital currency in the UK. But despite its increasing prominence, there remains uncertainty on in how it is dealt with in divorce proceedings, with some parties uncertain on questions such as: should cryptocurrency be disclosed ? We look in more detail at the rise of cryptocurrency in UK divorces and address some of the key issues.
What are cryptocurrencies?
Cryptocurrencies are digital assets that can be exchanged, bought and sold but there are no specific laws relating to cryptocurrencies as legal tender in the UK. They are built on peer-to-peer technology called the blockchain and do not utilise centralised banks like traditional currencies do. The value of crypto fluctuates, as it is based on supply and demand, making it difficult to attribute a value. They are accessible to anyone who wants to invest from exchanges such as Coinbase or through brokers like E-Toro.
The rise of crypto
Crypto is tipped to become a more mainstream form of currency not just in the UK but across the world as we see the US government take a keener interest in regulation, billionaires like Elon Musk accepting Bitcoin as payment for Tesla vehicles and more companies adopting blockchain technology. Management consultancy firm, Roland Berger recently highlighted an increase of 491% in Crypto Unicorn companies in 2021 with a rise also in M&A activities in the sector too.
Should cryptocurrency be disclosed?
Although there is no intrinsic value to any type of cryptocurrency, whether it’s Ethereum, Bitcoin or Dogecoin, it still has value and should therefore be considered an asset in divorce settlements. When financial divorce settlements begin, a Form E is filled in with full financial disclosure and signed by both parties. It is now expected that crypto assets should be detailed on this form.
Is cryptocurrency ‘property’?
Recent debate has been had on whether or not crypto should be considered as a form of property in financial settlements. The consensus in the UK is that it is and should therefore be considered and treated as such in terms of undergoing the same regulation as standard property like a house, pension or cash. This also means that courts are able to make orders against it. However, there are challenges because cryptocurrencies are not tangible forms of currency or subject to the control of a central banking system or the government. Indeed, crypto’s lack of traceability is often a main appeal for investors. The complexity of the technology associated with it means there can be problems when asking for full disclosure of assets from divorcing couples too.
Is my former spouse using crypto to hide assets?
If you think your former spouse is hiding cryptocurrency or using it as a method to conceal assets, and if there is evidence to prove this, a court injunction can freeze their assets. This can cover not only the alleged asset owner but on crypto exchanges too where they could be traded. This scenario can happen if one of parties has significant knowledge of the crypto market while the other doesn’t and it can put the other party in a position where they are unclear as to what they are looking for. There is definitely an element of risk involved in concealing cryptocurrency but it is one that some do seem willing to take.
What is the future of cryptocurrency and divorce?
Ultimately, cryptocurrencies and blockchain technology are on the rise, and their prevalence is likely to become more significant in divorce proceedings. There are many new and unique challenges presented to the UK courts regarding crypto and financial settlements which could well prompt further legal questions and changes in the future.