An initial and essential step in all property settlement matters is identifying and valuing the assets and liabilities of the relationship. This includes the “regular” things like home and mortgage, superannuation, cars and shares. But what about other assets, such as Bitcoin? Has your former spouse been investing in digital currency? What could this mean for your family law matter and importantly, your asset pool for division?
Cryptocurrency is considered an asset and accordingly it would be required to be included in the pool of property available for distribution. This means it also needs to be valued.
Cryptocurrency is traded using a digital wallet. The digital wallet has a public key and a private key. These keys are used to make the transactions. These transactions are then recorded on a digital public ledger. What is typically recorded is the transaction amount, but the user details are encrypted. That transaction can be traced back to the public and private key of the user’s digital wallet. So, whoever owns the keys, owns the cryptocurrency.
It would appear possible to search transactions that belong to the particular set of digital wallet keys. However, you are relying on your former spouse to be forthcoming with that information. In a perfect world, this would involve your former spouse giving you the keys to their digital wallet
When parties are resolving their family law property disputes they are required to make full and frank disclosure of all financial matters. This obligation would extend to providing the digital wallet information for any cryptocurrency held.
Unfortunately, not all people will be forthcoming with this information. There is currently no reliable means of tracing this information. For example, there is no authority that could be subpoenaed or a head office to visit.
Given the nature of cryptocurrency, it is very difficult to conclusively identify the owner. These cryptocurrency systems operate in a manner that allows its users to remain relatively anonymous and there is no central authority, such as a bank, to regulate and safeguard the transactions.
Currently, this aspect of property ownership has not yet been tested by the Family Law Courts. No doubt it will be soon enough.