Cryptocurrency & Property Settlements
The nature of property has changed over time and digital currencies are increasingly becoming part of the pool of assets available to be divided upon separation. Digital assets are those held in electronic form – they cannot be seen or touched. Cryptocurrency is a digital currency secured by cryptography, such as blockchain, across a decentralized network.
Cryptocurrencies are an asset and are treated the same as other assets such as real estate or cars in Australian family law. However, they pose a number of unique challenges to family lawyers including:
Cryptocurrency holdings cannot be subpoenaed, and records are usually stored digitally and accessible by only one party. It follows that in the absence of full and frank disclosure these assets can be “hidden” and ownership needs to be carefully traced. Traditional currency will usually initially acquire the digital asset, so retrospective banking records will need to be sought in the discovery process together with ledgers of all transactions for each wallet, exchange or cryptocurrency account.
In Powell and Christenson  Fam CA 944 the Husband was found to have failed in his duty of disclosure about his cryptocurrency investments. The Husband provided almost no documents to the Court in relation to the acquisition, disposal and/or current value of his Bitcoin and ultimately the Court found that the purchase should be the subject of an add-back to restore its full purchase value, where it was done unilaterally and in disregard of interim orders that restrained the use of funds.
Cryptocurrency holdings are extremely volatile. They can result in significant profits, and dramatic losses. Great care needs to be taken when considering who will ultimately take possession of the digital assets. In Balsam and Lackner  FCCA 1115 the Husband produced disclosure of his cryptocurrency the Thursday prior to the trial. He gave evidence the holdings had been originally purchased for $60,000, yet were now worth only $2,000. The Judge noted that “in the fullness of time they might, but only might, re-accrue, but in the current COVID-19 environment and the associated economic downturn I cannot give the Bitcoins any greater value than that.” What has since followed is an enormous growth in the value of the asset.
In addition to being volatile, these unique assets are high risk by their design. Transactions cannot be reversed; passwords can be lost and unrecoverable; wallets can be the subject of cybercrime, and security can be inadequate. There is significant commentary that holders of cryptocurrency need to be prepared to lose all of their investment.
If you or your partner has held or holds cryptocurrencies Dorter Family Lawyers & Mediators are expert family lawyers who specialize in all areas of family law and can assist. Please contact us on (02) 9929-8840.