Divorces in the United Kingdom and the United States are getting a lot more complicated, thanks to cryptocurrencies like Bitcoin. Virtual currencies, which are unregulated, have been long suspected of being misused for illegal dealings. The dark side of cryptocurrencies has now found a new victim: divorcing couples.
The divorce process requires that both parties fully disclose all of their assets and their realistic values so they can be split between them. However, cryptocurrency holdings offer a two-pronged problem.
First, individuals now have a novel way to hide their assets in virtual currency holdings in an anonymous manner. Since such holdings remain unknown to the rest of the world, it becomes difficult for anyone to realistically assess a person’s net worth and assets, which is a necessary requirement for the separation process.
Without any documented proof, identification of such virtual holdings becomes a costly and lengthy process, leading to more distrust among separating individuals and their lawyers. It is making room for a lot of claims and counter-claims between divorcing parties.
“It’s creating another layer of distrust that we haven’t had to deal with before,” Jo Carr-West, a partner at London-based Hunters, told Bloomberg. “The public perception that there is a lack of a paper trail causes the anxiety.”
Second, even if digital currency holdings are honestly disclosed by the divorcing parties, their wide price swings make valuations difficult. After all, how do you fairly split an asset whose true value changes from day to day?
On the one hand, there is a risk that one of the partners will not receive their fair share of the cryptocurrency holdings. On the other hand, there lies a potential for overvaluation of such holdings, leading to a monetary loss for one of the partners. This is making the divorce process more complicated, time-consuming, and bitter.
“Often in a divorce, one spouse is looking for a pot of gold that doesn’t exist. But with cryptocurrencies, it’s possible the pot does exist,” said Toby Yerburgh, head of Family Law at Collyer Bristow. Yerburgh said he’s starting to get more cases where partners are concerned about hidden Bitcoins.
In the United States and the United Kingdom, divorce proceedings often result in an equal splitting of assets. But with the border-less, decentralized nature of virtual currencies, it will be a challenge for authorities to navigate these murky legal waters.