In 2009 we saw the emergence of the worlds first form of digital currency, Bitcoin. Fast forward 13 years later and whilst Bitcoin continues to hold the largest market capitalisation in the world; in addition to many other forms of cryptocurrencies, we are also seeing a steady emergence in other forms of crypto assets such as non-fungible tokens (NFTs) which are non-interchangeable unit of data stored on a blockchain, a form of digital ledger, that can be sold and traded.
From a family law perspective, it is becoming more commonplace to see crypto assets in both de facto and matrimonial asset pools as even the most novice of investors tries their hand at trading digital currencies.
Unlike other financial assets, that are usually attached to a third party, such as a bank or other financial institution, the trading of cryptocurrency is anonymous, and transactions are recorded on a decentralized ledger system (also referred to as a blockchain). The problem this creates from a family law perspective is that if there is a suspicion that a party may be attempting to conceal their virtual assets, unlike with traditional financial assets, there is no third party to subpoena to assist you to ascertain the existence of those nondisclosed assets.
Could This Be Used As A Way To Conceal Assets?
Whilst it may seem tempting to conceal assets by transferring them to cryptocurrency, it is important to understand that it may be difficult to trace those transactions, with the use of forensic accounting technology it is not entirely impossible, and the costs implications for failing to comply with your disclosure obligations can be significant.
In 2020 the Family Court of Australia dealt with this very issue in the matter of Powell v Christensen[2020] FamCA 944. In that case, the husband had failed to comply with his obligation to provide full and frank disclosure of his cryptocurrency investments, and the virtual assets had been purchased in contravention of an order made by the Court restraining him from dealing with or disposing of property. The purchase of the cryptocurrency was able to be traced back to the husband and as the value of the cryptocurrency had decreased significantly since the time of purchase, the court determined that the purchase value should be adopted for the purpose of settlement.