Currently, the legal framework in NSW does not distinguish between Bitcoin and other cryptocurrencies like Ethereum or altcoins when it comes to property settlement. All digital currencies are considered financial assets and are subject to the same principles of valuation and division as other assets in a relationship breakdown.
What is considered a financial resource?
The Family Law Act considers all assets acquired during the relationship, or made during the relationship, to be part of the asset pool for a property settlement. This includes cryptocurrency, regardless of whether it’s Bitcoin, Ethereum, or another altcoin. The value of these assets is then considered when determining a fair and equitable division.
How are digital currency exchanges regulated?
Providers of digital currency exchange services are subject to a registration system. Operating a registrable digital currency exchange service without registration can result in offences and civil penalties. This registration process is overseen by the AUSTRAC CEO and maintained on the Digital Currency Exchange Register.
What about ‘wrapping’ crypto assets?
The process of ‘wrapping’ – representing the value of one blockchain asset on another, often using smart contracts – does not change the fundamental characterisation of the asset for family law purposes. It remains a financial resource subject to the usual valuation and division rules. The court will look to the underlying value, not the technical method of representation.
The valuation problem
Determining the value of cryptocurrency can be complex. Fluctuations in value are common, and tracing the history of transactions can be challenging. This is particularly true for altcoins with lower trading volumes or those held on unregulated exchanges. Establishing a fair market value at a specific point in time requires expert evidence, and disagreements about valuation are a frequent source of dispute.
Questions to consider
- What documentation do I have to prove ownership and the acquisition date of my cryptocurrency?
- If my former partner has concealed cryptocurrency assets, what steps can I take to uncover them?
- How will the court approach the valuation of cryptocurrency if there is disagreement between the parties?
This information is general in nature and does not constitute legal
advice. For advice specific to your situation, contact JB Solicitors.