Bitcoin and divorce - what are the issues?
15 February 2018
With the increasing popularity of investment in Bitcoin and other cryptocurrencies, more divorcing couples are getting into legal disputes over how they will split these assets on divorce, says Wilsons, a leading private client law firm.
Jacqueline Fitzgerald, Partner at Wilsons, says: “Proving that one spouse has a substantial holding in a cryptocurrency and adding that to the marital assets can be a big problem.”
Traceability
“If one party refuses to disclose details of their Bitcoin activities, or keep them a secret, then are untraceable.”
“Unlike a UK bank or other financial institution, an overseas bitcoin exchange is unlikely to respond to a court order to disclose an individual’s assets or freeze them. Even in the UK, the usual methods of enforcement such as freezing injunctions are essentially worthless, because there is no centralised authority.”
“If the crypto investment was made more than a year ago it may not even show up on the usual review of bank statements. Unlike most traditional investments, Bitcoin pays no dividends so there is almost no footprint for lawyers to identify.”
Reckless behaviour?
“The volatility in the price of Bitcoin could cause one party to argue that the investment was reckless, and then argue “recklessly dissipated assets” should the value plummet.”
“If one party brings this accusation against their spouse, the spouse could be penalised by gaining a lower share of the marital assets as a result. Assets found by court to be dissipated continue to be treated as marital property, and the remaining value can be redistributed to compensate the spouse.”
Volatility
“Another concern for divorcing couples is Bitcoin’s volatile nature. From day to day its value can plunge or rocket, making it difficult to negotiate the price at which it is split.”
“When the final order of the divorce has been signed, the spouse who swaps bitcoins for other assets in the divorce will not be able to claw back any funds if bitcoin collapses. Nor can they be forced to pay more if bitcoin soars – as long as they have made full disclosure.”
