Divorce solicitors are increasingly dealing with cases involving arguments over the division of cryptocurrencies such as Bitcoin.
If difficulties in tracing and recording such assets were not already enough, these divorce cases are further complicated by the wild volatility of such currencies, making it very difficult to value them correctly in time for final divorce settlements.
In fact, it has been reported that in the UK there have been numerous challenges in this area in recent months. For example, law firm Royds Withy King has spoken of a spate of divorce disputes involving Bitcoin, with one recent case worth £600,000 – however, just a couple of months ago the same amount of Bitcoin was valued at £1 million, and only one year before that £80,000.
"Token-based" financial services specialist Coinlist claims that people between 18 and 24 are four times more likely to invest in cryptocurrencies than their parents and so it would follow that divorce solicitors across the country will soon see an upsurge in high-value cryptocurrency asset disputes,
Bitcoin is more mainstream than ever before and it is possible that these cases may only be the beginning of an important new trend. The three cases represented by Royds Withy King were reported in a blog from the firm which detailed that although Bitcoin may be the best known cryptocurrency, it is by no means the only one represented in its caseload; Ethereum, Litecoin and Ripple have all also been the subject of recent disputes.
These currencies sometimes operate at the edge of the law and represent entirely new territory for the courts and the justice system has so far struggled to provide clear guidance as to how cases should be resolved. In some cases courts may find it impossible to make spouses fully disclose "virtual" assets, as they can both be effectively hidden and easily used on darknet markets (black markets).
In some cases one spouse may have no knowledge of the other's assets and because the value of Bitcoin has risen by several thousand percent over the past few years, the wealth may be completely unsuspected. For example, just £1,000 invested in Bitcoin in 2016 would have been worth £20,000 by December of last year.
Such fluctuations mean that continual and sometimes sudden valuations and re-valuations will need to be carried out in divorce cases involving cryptocurrencies. It is easy to see that this task could expose the limitations of some divorce solicitors. Not only are the values and whereabouts of cryptocurrencies difficult to track, efforts to do so inevitably demand a great deal of time and expense – all for very uncertain reward.
The reality of cryptocurrencies will inevitably present challenges to family law practitioners in other ways too. Once you marry the popularity of cryptocurrencies among younger people with the prevalence of prenuptial agreements in the same demographic, it is easy to see how they stand to become increasingly entwined with UK law over the coming years. As it stands, they are unregulated and largely considered "foreign currency" for legal and taxation purposes, including VAT and GST.
Royds Withy King partner Vandana Chitroda told Business Insider, "We believe that cryptocurrencies will be a significant feature in a large number of divorces. Whilst cryptocurrencies are volatile, they are not going to go away. It is important that if you believe your husband or wife has invested in or purchased cryptocurrencies, such as Bitcoin, and you are separating, you tell your legal adviser."
Contact Oratto on 0845 3883765 to speak with an adviser or use our contact form to arrange a call-back.