Cryptocurrency and Divorce: What You Need to Know

With the surge in cryptocurrency’s popularity, it’s no surprise that crypto assets are becoming a key consideration in divorce settlements. As of 2024, over 23,000 different cryptocurrencies exist with a total market value exceeding £808 billion. This growth means that many divorcing couples are now facing questions about crypto’s role in their financial agreements. Here’s what you need to know if digital assets like Bitcoin or Ethereum are part of your marital assets.

 

What Are Crypto Assets?

Crypto assets, often known as digital currencies, are forms of electronic money using blockchain technology. Unlike traditional currency, which is controlled by banks and governments, crypto operates in a decentralised system. This means it is peer-to-peer and not subject to central authority oversight. Well-known cryptocurrencies include Bitcoin and Ethereum, but there are thousands of others in circulation.

While crypto assets are a modern form of money, they are recognised as items of value that can be owned, transferred, and therefore included in divorce settlements, much like other financial assets.

 

 Are Crypto Assets Considered in Divorce Settlements?

Yes, crypto assets are treated similarly to other financial assets in the UK. Divorce law requires both parties to disclose all assets during financial proceedings, including any cryptocurrency holdings. Under English and Welsh law, this “full and frank” financial disclosure ensures that all assets are accounted for when the court or negotiators divide the matrimonial estate.

The valuation of these assets can be a bit trickier than traditional holdings due to their volatility, but nonetheless, they form part of the marital assets to be divided.

 

How Are Crypto Assets Valued in Divorce?

Given the rapidly changing value of cryptocurrency, determining an accurate valuation can be challenging. Unlike more stable assets, like property or cash, crypto values can fluctuate greatly over short periods. For instance, a cryptocurrency may be worth thousands of pounds one day, only to drop significantly the next.

To determine the value of crypto assets, one would multiply the quantity held by the current market price. Given this volatility, timing is essential to ensure a fair valuation in settlement negotiations. This is especially important when accounting for potential tax liabilities, as gains from the sale of cryptocurrency could incur significant capital gains tax if the asset has appreciated since purchase.

For further reading on cryptocurrency’s role in financial settlements, you might explore this scholarly analysis on digital assets in divorce (1) and this in-depth review of cryptocurrency and UK tax considerations.

 

 Dividing Crypto Assets in a Divorce Settlement

There are a few ways to divide crypto assets in a divorce:

1. Transfer of Ownership: The court may order one spouse to transfer part or all of their crypto holdings to the other. This may require setting up a new wallet for the receiving spouse, ensuring that both parties retain a stake in the asset.

2. Liquidation and Division: Another option is to sell the crypto assets and divide the proceeds. However, the timing of such sales is critical given market volatility, which may affect the final settlement amount.

3. Offsetting with Other Assets: Some couples may agree to offset the value of cryptocurrency against other assets, such as property or savings, to simplify the division process. In this case, it may be wise to use an average value of the crypto over a period rather than a specific day to account for volatility.

 

What If Crypto Assets Are Hidden?

Full disclosure is essential in divorce cases, and this applies to cryptocurrency. If you suspect your spouse is hiding crypto holdings, you can take several steps:

Review Financial Transactions: Look for any transfers to crypto exchanges like Coinbase or Binance.
Forensic Investigation: Engaging an expert to analyse your spouse’s financial transactions can reveal concealed assets or irregularities.
Court Orders for Disclosure: If you can demonstrate that your spouse may be hiding assets, the court can order further disclosure, potentially from third-party exchanges, to verify holdings.

If a judge suspects assets are hidden, they may adjust the final settlement to account for any potential undisclosed crypto.

 

Protecting Your Crypto Assets in Divorce

If you are the crypto holder, transparency is crucial. Keeping a clear record of all transactions can protect your investments and avoid accusations of hiding assets. This includes the date of each transaction, the amount, and its current value. Seeking professional advice to understand the implications of disclosing and valuing these assets will help secure your position and ensure a fair outcome.

 

 Final Thoughts

Crypto assets are becoming an integral part of many divorce settlements. As such, they require careful consideration to ensure both transparency and fairness. Working with experts—both legal and financial—can be invaluable in navigating these complex assets. If you suspect significant crypto holdings are being concealed by your spouse, taking action early can ensure that these are accounted for, leading to a more balanced settlement.

 

Ready to discuss your situation with an expert?

Cryptocurrency can add complexity to divorce proceedings, but you don’t have to face it alone. Our specialist team at OLS Solicitors is here to help. Whether you’re starting divorce proceedings or simply looking to understand your rights, contact us today for tailored advice that takes the stress out of dividing digital assets.