According to the latest research from the Financial Conduct Authority, approximately 12% of adults in the UK are now investing in cryptocurrency, and with governments and the world’s largest asset management firms creating national Bitcoin reserves and exchange-traded funds, it follows that cryptocurrency is becoming a common feature of divorces.
Cryptocurrency (“Crypto”) is a form of digital currency. Most people will be familiar with the original and most common example, Bitcoin. Other examples include Ethereum, XRP, Solana, and Ada. There are tens of thousands of ‘coins’ making up the crypto market, in the same way there are many (but much fewer) forms of traditional currencies such as the Pound Sterling. These ‘coins’ range in scale and seriousness from those created by global tech projects, to memes and scams.
Crypto can be used in very narrow circumstances to purchase goods and services, but it is more commonly utilised as an investment. Crypto is very volatile and its value can fluctuate widely. It can be acquired using traditional money (called ‘fiat’ in the crypto world), held, and sold for traditional money. You can also trade one type of crypto for another. Crypto can be held with an online exchange, online wallet, or stored in an offline wallet similar to an external hard drive. The global crypto industry is valued at approximately $3 trillion and it remains unregulated in most countries, although that is gradually changing.
Tracing and Valuing Crypto in a Divorce
When it comes to crypto in divorce, there are two main issues arising:
- Tracing the asset:
Often, a spouse will have invested in crypto without the other spouse knowing about it. If a spouse chooses not to disclose their holding, it can be extremely difficult to trace and locate.
Crypto is currently unregulated by virtually all governments and central banks and not protected under the FCA. Crypto is entirely digital and non-physical and there are many different ways it can be acquired. Transactions involving crypto are recorded on a blockchain. The names of individual holders are not recorded. Whilst crypto is perfectly legal to trade and own, the estimated 560 million holders of crypto across the world enjoy an unprecedented level of privacy.
- Valuing the asset:
Crypto is an extremely volatile asset and its value can multiply over a short space of time. Bitcoin, considered the most stable coin with the largest market cap, increased in value by 125% during 2024. Value can also plunge within a matter of hours and the entire industry is extremely vulnerable to speculation, traditional markets, macroeconomics, and market manipulation.
How the Courts treat Crypto
Crypto is treated as property in England and Wales. This will also apply to Northern Ireland. This means that cryptocurrency is treated as an asset for the purpose of divorce. To confuse matters somewhat, certain forms of cryptocurrency can also yield an income, similar to how interest accrues on savings.
Courts have considerable discretion in dividing and distributing assets upon divorce. There is the initial question of calculating the true market value of any crypto identified in a divorce. This computation exercise may involve evidence being commissioned from an expert in digital assets and a tax advisor. Once a Court has made any necessary determination on market value, the question arises as to whether or not the crypto should be considered relevant and distributed between the spouses, and if so, how that can be fairly achieved. Factual matters then come into play, such as when the crypto was originally purchased, the source of the initial funds, when did periods of growth and loss take place, did the holding spouse actively trade the crypto during the marriage, and the extent of any matrimonialisation of the asset. These factual matters will be given appropriate weight by a Court by virtue of the statutory factors that the Courts consider in determining the fair and equitable division of assets in divorces.
Crypto can add an additional layer of complexity for divorcing couples. Whether you suspect that your spouse holds crypto, or if you own crypto and seek to protect your holdings in a divorce, it is critically important that you instruct a Solicitor who specialises in Matrimonial Law and who understands the intricacies of crypto as an investment asset.
Our Family & Matrimonial team are highly experienced in handling cases involving cryptocurrency for private clients. If you have any queries about any of the issues raised in this article, please contact our Family & Matrimonial team.
This article has been produced for general information purposes, and further advice should be sought from a professional advisor.
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