How is Cryptocurrency dealt with in separation? Here’s what you need to know!
Property settlements can be difficult and complicated when finalising the financial aspects of a relationship. It is a requirement that separating spouses/partners provide full disclosure of their assets to each other in property settlement proceedings. But what about your online assets? Have you ever thought about how cryptocurrency is dealt with in family law proceedings?
What is cryptocurrency?
Cryptocurrency, such as Bitcoin, is virtual units of currency that operate outside traditional banking systems.
A characteristic of cryptocurrency is its anonymity. People can convert their assets into cryptocurrency in an attempt to conceal their true possessions. When compared to other assets such as cash and money in banks, cryptocurrency can be easily concealed.
Once a unit of cryptocurrency has been purchased, like Bitcoin, or an asset is converted into a cryptocurrency, the ownership of the unit of cryptocurrency can be untraceable. Cryptocurrency is retained in a ‘digital wallet’ and works in a similar way to that of a physical wallet. Only the owner of the cryptocurrency knows where the money is held, unless they decide to share the information.
Issue in family law proceedings
Cryptocurrency’s anonymity causes an issue when it comes to financial disclosure in family law proceedings. People may assume that cryptocurrency is difficult to trace and accordingly fail to disclose the asset to the other party and the Court.
Under the Family Law Rules 2004, all parties to family law proceedings must disclose ‘any vested or contingent interest in property’ and ‘any other financial resources’. This disclosure obligation includes cryptocurrency.
Another issue is in the difficulty in valuing cryptocurrency, which can fluctuate dramatically over even the shortest period of time. The nature of this fluctuation causes potential risk if the value of the cryptocurrency rises greatly following Court orders. This may result in one party profiting immensely to the other party’s detriment. Unfortunately, once orders are made by the Court they are made in full and final settlement.
How to deal with cryptocurrency?
Given cryptocurrency is somewhat new, the Court is yet to have made a decision as to how to deal with these types of cases. It has been suggested by the legal profession in the United Kingdom, who have dealt with such matters, that when disclosing cryptocurrency, it be valued a number of times throughout the property settlement to monitor any drastic fluctuations and safeguard the accuracy of the valuation.
Nevertheless, if you are a party to family law proceedings, you ought to abide by your obligations under the Family Law legislation to provide ‘full and frank disclosure’. Failure to do so may (likely) result in penalties against you.
At Bambrick Legal, we can assist you with the disclosure of all assets and liabilities for family law proceedings to ensure parties receive a fair share of the asset pool. Alternatively we can help protect your assets in case of a family breakdown. If you would like further information, contact one of our experience Family Law practitioners today on (08) 8362 5269.