Cryptocurrency in family law

How Should Cryptoassets Be Treated Legally In Marriage And Divorce?

Cryptoassets continue to grab headlines after the recent decision by a judge in the Commercial Court who found that a cryptoasset, such as Bitcoin, was a form of property capable of being the subject of a proprietary injunction.

In this case the claimant obtained an injunction against the defendants, freezing the Bitcoin. This follows on from the UK Jurisdiction Taskforce’s statement towards the end of last year that the asset class is, in principle, property under English and Welsh law. The judge’s finding was significant as it is the first judicial decision on the status of cryptoassets in this emerging area of law, rather than simply relying on guidance.

We frequently find ourselves discussing cryptoassets especially given the often salacious coverage. For example, in the case of the disappearance of the founder of the fake cryptoasset, OneCoin, and the calls for Gerald Cotton’s body to be exhumed – he was the founder of Quadringa CX who died in 2018 taking £105m of cryptocurrency with him. But how much do we really understand about them?

Parties to financial proceedings in family law have a duty to disclose all property and assets that they hold, which, following from the above decision, now also includes any cryptoassets. If this trend towards cryptoassets is to continue, and the take up of cryptocurrency increases, they will eventually become a significant part of financial proceedings that family law practitioners will have to get to grips with. This includes consideration of how to accurately attribute a value to them or deal with situations where one party is potentially hiding cryptoassets.

This will potentially be problematic for family lawyers since, by their very nature, cryptoassets are difficult to trace and hard to value. Cryptocurrency values are unstable and therefore a valuation made at the outset of proceedings may well be dramatically different by the time the matter reaches its conclusion. Furthermore, cryptoassets are shrouded in secrecy, and as practitioners we may have to increasingly rely on the services of forensic IT companies to track down and trace any potential assets with the associated cost. How the courts will get to grips with these issues is another question entirely. Overstretched and under resourced, how will the system cope with an increase in cases that have a cryptoasset element to them, and the complexities that go hand in hand with them?

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