Cryptocurrency first appeared in some form in the 1980s, but perhaps the most well known, Bitcoin first appeared in 2008 and grew out of the global economic crash.
Bitcoin became increasingly popular around 2010 as form of untraceable currency on the Dark Web and has been described as an “economic bubble”.
However, Bitcoin, and other Cryptocurrencies have now been adopted by countries all over the world and are recognised as assets in most countries. Caselaw has confirmed that Cryptocurrencies are an asset in the UK, and as such the Court can make orders against it. Caselaw has also confirmed that Cryptocurrency can be held on trust for others, and is subject to CGT, corporation tax and income tax like any other asset.
Cryptocurrency in Family law
As Cryptocurrency becomes more mainstream and globally recognised, it is no longer just for the tech savvy amongst us. As a result, Cryptocurrency is playing an increasing role within family law proceedings. Research by the Financial Conduct Authority found that around 12% of UK adults owned Cryptocurrency in 2024, up from 4% in 2021.
Within divorce proceedings, parties are required to complete full and frank financial disclosure, which includes disclosing all assets and providing evidence of the same. For a bank account, this means disclosing 12 months of statements for example.
Cryptocurrency wallets don’t come with monthly statements, and may be stored on phones, USB sticks or even ‘paper wallets’. For Cryptocurrency, you should be disclosing the wallet transaction history for every wallet that you own. A screenshot is not sufficient, as this is the same as an account overview of your standard bank account – it will only show the current balance, and will not show what the balance was 6 months ago for example.
Whilst it is very difficult to hide activities on public keys, for this reason, some people are nervous about disclosing the details of their public wallet. As the name suggests, these are in the public domain. Once you have the details of a public wallet, you can follow this forever, even if it transferred to another wallet, which a person may not want once their divorce proceedings are concluded. It is important to consider whether it is reasonable to disclose your public key or consider whether you need the public key if you are pursuing disclosure.
It is extremely important not to disclose the private key. This is what gives you the authority to trade and deal with your Cryptocurrency, similar to your PIN or online banking password. Therefore, it should never be disclosed to anybody, even within divorce proceedings.
Tracing hidden cryptocurrency assets
Unlike a property or a bank account, Cryptocurrency can be hard to identify if someone doesn’t disclose it. If you are concerned that your spouse has Cryptocurrency that they have not disclosed it is important this is raised to your solicitor as soon as possible. In some cases, forensic accountants can be brought in to investigate, using blockchain tracing tools, though this comes at a cost and may only be worthwhile for higher-value disputes.
If a forensic accountant is considered too expensive, it is important to review bank statements carefully, as even small transactions could lead to the discovery of a Cryptocurrency wallet. Most trading platforms will respect Court orders such as third party disclosure orders, so these orders can be obtained if necessary as caselaw has confirmed that orders can be made against digital assets.
Valuing cryptocurrency in divorce settlements
Even when the full picture is known, Cryptocurrency can be difficult to value, due to their volatile nature. In the same way as high risk stocks and shares, their value can increase or decrease significantly during a short space of time, so it is important to consider the balance of risk if Cryptocurrency is an asset in your matrimonial pot; a Judge would expect the risk to be shared between spouses, or for the party left with the safer assets to receive a relevant discount.
If you would like expert advice on how cryptocurrency or other digital assets may affect your divorce or financial settlement, please contact Lauren Pilcher and our Family Law team here.