Cryptocurrency and Family Law

Cryptocurrencies are counted as a financial asset that will be part of the asset pool to be divided in the course of a property settlement following separation or divorce. As a property settlement takes in all assets owned by the parties to the relationship, this will include the ownership of any crypto. Cryptocurrencies pose some unique challenges as they can be difficult to value and locate.  

What is a property settlement? 

A property settlement occurs when a separating couple wants to divide their assets between themselves. The end result should reflect a fair and equitable division of assets, taking into account considerations such as the care of children, the salary of each party, and their expected future earning capacity. 

Undertaking a property settlement involves four main stages: 

1. Identifying the asset pool
2. Assessing the contributions of each party to the relationship
3. Consideration of each individual’s future needs 
4. A final examination by the Court to determine a fair and equitable result 

In this article, we will focus more on the first part of the property settlement stage: identifying the asset pool. This stage is where all assets and liabilities of both parties are identified. Whilst this stage may be straightforward, individuals owning cryptocurrency may face additional challenges, particularly regarding its valuation and ownership. 

Cryptocurrency and property settlement

There are 3 stages to undertake if you or your partner have any cryptocurrencies: 

1. Determine whether your partner holds any cryptocurrencies
2. Determine how much cryptocurrency they have  
3. Determine the dollar value of this asset 

‘Full and frank disclosure’ 

Family law proceedings require that each party give their full and frank disclosure about their financial assets and circumstances. This is extremely important as it allows both parties to ensure that the agreement they are deciding upon is fair and appropriate.

In normal circumstances, any relevant body (such as an employer or bank) may be issued a subpoena if it is suspected that one party is withholding information. You may also be able to commence proceedings in the Family Court of Australia or in the Federal Magistrates Court.

However, cryptocurrencies can make this process more difficult, particularly because cryptocurrencies have no central governing body and are decentralised. This means that there is no institution or body that can be subpoenaed if information is withheld.

Even if you are sure that your partner holds such crypto assets, it may be difficult to prove if you have no access to any passwords or keys. In certain circumstances, the court may also order that electronic devices be seized. 

If you find yourself in this difficult position, it may be best to obtain legal advice to see the options that are available to you. 

How can the value of cryptocurrency be determined? 

Cryptocurrencies are known for the volatility of their value. For example, some cryptocurrencies can increase over 20% of their value in a single day. Thus, their value is an extremely important consideration for courts as it can have a large impact on the amount of assets that each party receives. 

Thus, the timing in which these assets are valued is crucial. The courts have some ability to consider the extreme volatility of some cryptocurrencies, though the law is still continuing to develop in this area. 

Once you are aware that your partner holds cryptocurrencies, they can be valued with reference to the market value. This is the same process taken for other assets in a property settlement. 

Because of the volatility of cryptocurrencies, courts also have the power to decide whether they want to compensate an individual if the other party has acted recklessly, or acted in a way designed to reduce the amount of assets available.

However, proving that an individual has deliberately reduced the value of assets to sabotage another during a property settlement can be difficult. 

If you need any assistance regarding cryptocurrency in a property settlement, please feel free to contact us to speak with a friendly family lawyer.