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Navigating Cryptocurrency in Family Law: Unveiling the Hidden Digital Wealth

Cryptocurrency is an asset that has gained celebrity far beyond its size.

The volatile nature of cryptocurrency - given its capacity to rise and fall (and seemingly rise again) – means that particular care needs to be taken when identifying and determining the value of cryptocurrency in family law financial settlements and property division.

When a couple separates, they have a duty to disclose to each other all information relevant to their financial circumstances such as their income, their assets, cars, investments and their superannuation accounts. This also extends to their cardano, dogecoin, Litecoin, Shiba Inu, bitcoin, Ethereum or tether holdings. It even includes their Terra stablecoin holdings despite its value collapsing from USD$45billion to zero within a week.

But what happens when your former partner does not provide information about their cryptocurrency?

Firstly, have your lawyer review the documents that have been provided. Bank statements may show whether withdrawals have been made to a cryptocurrency exchange, when purchasing cryptocurrencies.

Once the exchange is known, request the transaction listing for it from your former partner. This might also identify transactions which convert one type of cryptocurrency to another (say, bitcoin into tether).

This is important as wealth can be transferred from one ‘wallet’ to another. A ‘wallet’ in this context is a digital application that contains an electronic key providing access to the cryptocurrency.

A wallet must be held on a platform. A ‘hot wallet’ is one typically connected to the internet and a ‘cold wallet’ is usually not. The existence of a physical platform or cold wallet provides opportunities for a party to consider invasive search and seizure orders. An application of that kind requires technical legal knowledge and skill, because of the invasive nature of those kinds of orders.

In Powell & Christensen [2020] FamCA 944, Powell argued that Christensen had spent around $100,000 purchasing various cryptocurrencies. Christensen claimed that through some bad purchases, the $100,000 he invested had been whittled down to around $47,000. Christensen refused to provide clear evidence to support this claim. Christensen had already been found to have avoided making proper disclosure of his finances, and the Court was willing to find in favour of Powell that the value of the cryptocurrency would be around $100,000. That amount was notionally added back into the property pool and counted as part of Christensen’s entitlement.

Sounds difficult? Cryptocurrency can be – and we would suggest that you speak to lawyers to determine your rights and entitlements.