When you’re divorcing, any assets owned by yourself and your former partner, whether singly or jointly, are taken into account.
These can range from properties and valuables to pensions and savings accounts. But there’s one asset that can be complicated to value – cryptocurrency.
Cryptocurrency, which includes Bitcoin and Ethereum, was once seen as a fringe digital asset. But it’s become far more mainstream and should be considered to be as important as any other asset on divorce explains divorce lawyer Rachel Buckley.
What is it?
We’re all getting used to paying with money that isn’t ‘physical’ – via card or phones. Cryptocurrency takes this a step further as it is pure digital money with no physical form at all.
Usually cryptocurrency is held as an investment for online trading. However, it’s also now being used to buy items and services.
The concept is complex: coins or tokens have unique codes, held in a wallet, either ‘hot’ which is connected to the internet, or ‘cold’ which is where coins/tokens are stored somewhere such as USB – some people keep this as a ‘paper’ wallet with a code physically written down.
How does it work?
Cryptocurrencies use a ‘Blockchain’ technology. Difficult to explain if you’re not a techy person, it’s a digital ledger of transactions that is duplicated and distributed across an entire network of computer systems. It records information in a way that it is difficult or impossible to change, hack or cheat the system.
There’s no centralised system, no regulation, and neither banks, governments nor other authorities have any control of it. Cryptocurrency is anonymous.
I have cryptocurrency, should I disclose it?
During a divorce, finances are divided and both parties must provide full and frank disclosure. Cryptocurrency is an asset, and may be of significant value, so yes. Likewise, if your former partner has cryptocurrency, they should disclose it.
What if I think my former partner is hiding cryptocurrency assets?
Cryptocurrency is virtual so it is hard to uncover but not impossible:
- Bank statements may show that money is being transferred to a cryptocurrency trading platform
- Your former partner may have a ‘cold’ wallet as mentioned above, a USB or written down on paper, and may have mentioned this to you in the past
- The cryptocurrency could be producing an income so could be apparent on tax returns.
If you are unable to find evidence (and remember this must be done legally without breaking privacy laws) but you still believe the cryptocurrency assets exist, your lawyer can instruct specialists to investigate. This will, of course, carry a cost, so you need to be convinced that these assets exist.
Cryptocurrency and divorce – How will it be distributed between us?
Depending on what you agree, the cryptocurrency can stay where it is, be transferred from one party to the other, or shared between you. If it is to be transferred or shared, one of you may need to open a trading account in order to take possession of the coins.
You may need specialist tax advice for this. We can put you in touch with an expert who will help you to understand the implications, such as Capital Gains Tax.
Potentially you could offset it against another asset.
Speak to an expert about cryptocurrency and divorce
If you think cryptocurrency may be part of the assets in your divorce you should consult a qualified lawyer or other relevant professional. Our experienced divorce and finance lawyers offer a free initial appointment to talk through your personal situation. You can get in touch by completing the form below or calling 01392 421777.
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