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More and more people have digital assets such as cryptocurrency that can be worth a fortune. However, it isn't mentioned in the Family Law Act and its division is increasingly a battleground in property settlements in a divorce.
Cryptocurrency considered "property" in a divorce
Even though Bitcoin, Ethereum and other digital assets are not specifically mentioned in legislation, they are considered to be "property" and are subject to the laws covering the division of property in a divorce or separation, the same way as a house, car, investments or money.
Family lawyers are increasingly seeing disputes over hidden cryptocurrency and frequent flyer points in property fights between separating couples.
Cryptocurrency exists only on computers, but it can be used for payments if the other party agrees. It generally increases in value as buyer demand grows. For instance, if you invested $1000 in Bitcoin in 2010, it would be worth $1.07 million now.
Valuing cryptocurrency during divorce proceedings
Disputes over division of cryptocurrency in divorce property settlements can be difficult and complex, particularly as there is no central register, so holdings can be relatively easy to hide.
Putting a dollar value on cryptocurrency can be difficult, as prices fluctuate. Usually courts accept the current value of the cryptocurrency, but parties often argue that it should be the value at the date of purchase, the date of cohabitation or the date of separation.
It may be necessary to consult cryptocurrency experts to locate, track and calculate the amount held by the parties involved in the separation. Transactions are often anonymous and buried in blockchains. It may require forensic accountants to find these hidden digital assets.
Divorce case involving cryptocurrency where value plummeted
A 2020 divorce case in the Family Court which involved cryptocurrency and which is often cited is Powell & Christensen [2020] FamCA 944. The husband had invested around $100,000 in cryptocurrency after separating from his wife.
The wife wanted that amount returned to the pool, but the husband claimed it was now worth only half of what he had invested. That was not proved, so the judge ordered he return the full $100,000 purchase price to the property pool.
Then comes the question of how to divide these digital assets. It may be a trade-off, where one person keeps the cryptocurrency and in return agrees to hand over their share of other joint assets, such as investments.
This could save on tax, as cryptocurrency can be subject to capital gains tax when sold or transferred.
Frequent flyer points in divorce proceedings
It is the same with frequent flyer and other award points, which can add up for people who travel a lot and amass points through shopping. Some can be cashed in or transferred. (Please see Sebastian & Sebastian (No 5) [2013] FamCA 191.)
In one divorce case, a judge ordered a husband to transfer a million points to his wife. In another case a father with 1.7 million Qantas frequent flyer points was ordered to transfer 600,000 points to his three children. (Please see Carson & Walters [2017] FamCA 330.)
If someone suspects their partner has secretly siphoned savings into cryptocurrency, they must remember it is part of the couple's joint property and must be declared during property settlement negotiations.
Ashleigh Flanagan
Property and financial settlements
Stacks Law Firm
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
