Hidden cryptocurrency assets becoming bigger issue in divorce cases, warns Yorkshire law firm
Family law specialists in Yorkshire say they are dealing with a growing number of divorce cases involving cryptocurrency, with some spouses attempting to hide digital assets.
John Howe & Co, which advises clients across England on divorce, financial settlements and complex asset disclosure, says digital investments have become one of the most challenging areas in modern family law.
Cryptocurrencies and online trading accounts are now appearing frequently in financial portfolios. Under the Matrimonial Causes Act 1973, both parties are legally required to disclose all financial resources, and courts now routinely expect statements covering all valuable digital assets.
Solicitor Bryn Rees said: “We are seeing more clients surprised by the scale or sophistication of a spouse’s digital holdings, which are often highly volatile and may fluctuate in value and, if purchased some years ago, can have increased dramatically.
“People can assume that crypto is somehow outside the traditional system, but when a marriage breaks down, it must be treated like any other asset. What complicates matters is that a single individual can scatter their holdings across multiple platforms, and that naturally raises the risk of things being overlooked or purposely kept back.
“Many crypto tokens operate on an immutable ledger, so all transactions are public and traceable. In principle this is a significant benefit for transparent disclosure in financial proceedings, but for this to be effective this requires that the wallets first are identified and linked to the party in question. This is where the difficulties can arise, in particular in cases where a party is not forthcoming in disclosing their wallets and this can be especially difficult where tokens are being held in hard wallets or otherwise off exchange.
“It can be the case that one party is convinced that digital assets have been hidden, and the other is adamant they don’t exist. Blockchain analysis can be extremely effective, but it doesn’t come cheaply, so both sides feel the strain. Once those suspicions take hold, the rest of the negotiations become far harder.
“A secondary complication posed by cryptocurrency holdings in divorce are the tax implications. CGT liabilities can be difficult to establish, and often requires specialist accountants familiar with crypto and its treatment within the tax regime.
“The age-old advice we provide all clients is that there are only one set of winners in a dispute, the lawyers - and that advice holds true with crypto. Where less than full and frank disclosure is forthcoming, investigating crypto holdings can demand that substantial time, and therefore costs, be incurred, all the while depleting the matrimonial assets of the parties and making what can be a difficult process, harder still.
“It is important, therefore, that if you are or are likely to be in the process of resolving matrimonial finances where crypto is to be a live issue, you should ensure that the solicitor you instruct is familiar with this, and can navigate these potential issues in a practical and economic fashion.”