Regulators aren’t the only ones trying to work out how to classify cryptocurrencies. As they become more of a mainstream asset, divorce lawyers are now being confronted with an altogether new problem of their own: who gets custody of the Bitcoin?
Law firm Royds Withy King say that they are currently working on three divorce cases involving cryptocurrencies, with one couple arguing over a £600,000 crypto stash. According to Royds Withy King partner Vandana Chitroda, these cases are just the beginning and “we expect to see many more.”
Range of Complications
Cryptocurrencies present unique problems to the courts. First, they are by nature relatively anonymous. You may not know if your partner has been siphoning off the milk money to buy Dentacoin.
Mark Phillips from the family team at Royds Withy King says that during a divorce, “parties have a duty to provide full and frank disclosure of their assets”. However, if one or other decides not to do so, “tracing cryptocurrencies could be enormously time-consuming and expensive” and when “purchased directly and moved offline, it becomes almost impossible to trace”.
Secondly, they are notoriously price volatile. If one partner is to give the other the fiat equivalent of a cryptocurrency holding, at which price is it measured? The price at purchase or the price now? Or the price by the time you finish this sentence? Ms Chitodra suggests that, “valuations will have to be carried out a number of times during the divorce process as the case progresses.”
Alternatively, Deborah Jeff, head of family at Seddons, suggests it’s best for both to hodl. “The value can change so dramatically that it’s usually advisable to share the value equally between the parties,” she said.
Finally, there’s the question that has vexed governments, regulators and central banks worldwide: what, exactly, are cryptocurrencies? According to divorce lawyer John Oxley, “it’s not certain what power the court has to make orders over cryptocurrencies because it’s not entirely clear what kind of property they are.“
How this legal situation develops will be keenly monitored by both the SEC and Monero-hoarding husbands. In the meantime, Ms Chitodra suggests that if you suspect your estranged partner of having bought cryptocurrencies, “you tell your legal adviser.”