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Businesswomen’s guide to Bitcoin and breakups: How cryptocurrency relates to Family Law

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A businesswoman should always be careful of all property division when there is a relationship breakdown, and that applies equally to digital assets as it does to tangible ones.

When your relationship breaks down and you decide to separate from your partner there are a number of steps you’ll take to dissolve the relationship. One of these steps is of course the division of assets.

Whether in sole or joint names, located domestically or overseas, parties are obligated to disclose all of their assets and liabilities throughout legal proceedings.

With the increased popularity of cryptocurrencies (Bitcoin in particular), a layer of complexity has been added to asset division. This article outlines what every business woman needs to know about Bitcoin and the importance of understanding the cryptocurrency in relation to asset division under family law.

What is Bitcoin?

Bitcoin is a digital/virtual currency (or cryptocurrency), which means it does not exist in a physical form (coins or notes). Users can obtain Bitcoin by earning or creating it, or purchasing Bitcoin on an exchange platform. Bitcoins are registered to bitcoin addresses which an individual creates by picking a random private key.

How it works

Bitcoin is spent through a software wallet (which connects to the network) or an online wallet (an account on a website where the individual’s Bitcoin wallet is held). The Bitcoin wallet contains a public key which provides information for the users to access (but does not contain any user information), and the private key referred to above. To spend the Bitcoin, the owner must know the private key and digitally sign the transaction. The network verifies the signature using the public key. No personal information is recorded in the Bitcoin ledger, and personal information is not directly associated to Bitcoin account numbers.

Funds are not tied to real world entities but Bitcoin addresses. Owners of the Bitcoin addresses are not explicitly identified. It is also possible to generate a new Bitcoin address for each transaction.

Bitcoin can be used for the payment of goods and services to anyone who is willing to accept it. The number of people willing to accept Bitcoin since it was first introduced in 2009 has significantly increased. It can also be traded for profit, much like traditional share investing.

How is this relevant to asset division in family law?

1. As an asset, the value of a party’s Bitcoin should be included on the Balance Sheet. However, there can be significant difficulties ascertaining the true value of an individual’s Bitcoin account. Bitcoin operates outside the banking system and uses encryption techniques to regulate the transfer of funds. Generally, Bitcoin is very difficult to link to an individual.

If you suspect that your partner or spouse has Bitcoin, you can request disclosure as to same.

If this is denied, you will need to locate some evidence, such as monies being taken out of bank accounts for which no corresponding transaction can be found, and make an argument to the Court that the party doing so has had the benefit of these funds and that the Court should make an adjustment in your favour.

2. If a person runs a business which accepts Bitcoin, there may also be difficulties in properly assessing the value of that business.

3. The value of Bitcoin in recent times has fluctuated significantly. As the value of assets are taken as at the time of agreement/judgment and not separation, it is important to keep up to date with the current values of Bitcoin. In 2011, one Bitcoin cost US$0.30, by 30 November 2017, one Bitcoin had crossed the US$11,000 mark. As at 12 January 2018, one Bitcoin costs over US$13,000. This can have a significant impact on the Balance Sheet.

4. Given the ease and anonymity of transactions, it may be wise for parties to seek injunctions against trading in Bitcoin if it is established that a party is in possession of same.

Your family lawyer will be able to assist to review the disclosure provided and determine where questions need to be asked or forensic accountants retained. He or she will also be able to formulate relevant and specific questions with a view to ascertaining if such an asset exists.

It is recommended that you speak with a family lawyer on separation to obtain more information about the process of financial settlement and such disclosure generally.

This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

About Sherlene Heng

Sherlene Heng is a Senior Associate in the Family team at Swaab Attorneys. She is on the website here and LinkedIn here .

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