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Divorce And Cryptocurrency - Issues Arising

More and more cases we are instructed on have a crypto element to them. Historically they have been in relation to criminal cases however more recently we are receiving enquiries from family solicitors with similar issues when dealing with divorce proceedings. We do not intend here to detail the workings of cryptocurrencies but highlight the major issues that repeatedly arise.

Hidden Assets

Some spouses are using cryptocurrency to hide money during divorce settlements. The first and hardest task is to identify that cryptocurrency is actually held by the spouse. Suspicion by one spouse may be the only evidence currently available and this may be because of past conversations or perhaps a change in lifestyle of one party. The Court has power to make a Search and Seizure order if compelling documentary evidence can be produced to the Court to show that a spouse owns cryptocurrency. This may take the form, for example, of historic text or email messages. Such orders are expensive and difficult to obtain but, once obtained, they may allow digital forensic experts access to the spouse’s computers and electronic devices and search for further evidence of cryptocurrency transactions in files, emails, browser histories, or search for login information for crypto accounts.

Other possible sources of evidence:

  • Transfer activity on bank and credit card statements
  • Records of cryptocurrency income on past tax returns
  • A spouse may have listed cryptocurrency on past loan applications as an asset
  • A digital ‘wallet’ that can be linked to a spouse

Beware, parties to divorce proceedings may not access their spouse’s computer or phone without authorisation.

Other evidential challenges:

  • Converting the asset to sterling and freezing the asset to not only prevent fraud but also to ensure preservation. Cryptocurrencies can be transferred within fractions of a second so it is vital that legal advisers act quickly.
  • Refusal by one spouse to disclose the statements containing crypto transactions
  • Newer cryptocurrencies are harder to trace
  • Dealing with cryptocurrency exchanges in foreign jurisdictions
  • The costs of recovering such alleged hidden assets may be disproportionate to the amount that is being tracked down and this will include the extra time required by the solicitor to consider the findings of digital forensic experts

The Courts have the power to re-open divorce settlements years afterwards if it can be proven that either party failed to disclose all his/her assets.

The key is about getting as much information as possible to evidence how the crypto assets have been purchased and finding the connection between the spouse and the asset.

Valuation Issues

Cryptocurrency valuations are notoriously volatile i.e. they are subject to significant swings in valuation. There are several solutions to deal with this problem such as:

  • The Court ordering a transfer of part of the holding from one spouse to the other
  • Determining the market value at a particular date and time and the equivalent value in other assets being transferred to the spouse in their place
  • When valuing assets that are difficult to value, often a range of values is provided. In the case of cryptocurrency this range may be even wider

Other valuation issues:

  • If the crypto wallet is held on more than one phone in different jurisdictions, which currency is used to value the cryptocurrency?
  • What if both spouses have knowledge of the ‘Personal Key’ to access the ‘Wallet’ which holds the cryptocurrency acquired by the other spouse? It might be argued that cryptocurrency has become a joint asset.
  • The asset may have been bought on behalf of a spouse by a third party to disguise its purchase.
  • Cryptocurrency may have been received by one spouse in exchange for other goods.
  • Consideration should be given to the fact that cryptocurrency transactions can be subject to income tax or capital gains tax and therefore the risk of unforeseen tax liabilities and penalties needs to be taken into account.

As the transacting and holding of cryptocurrency assets becomes more mainstream in the economy, the issues above are more likely to arise. Please contact Davidsons Forensic Accountants on 0113 483 1127 should you require any assistance with any of the issues highlighted above or email us at

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