How is it treated as an asset?
The rise and fall of Bitcoin and accelerated interest in investing in crypto currency paved the way for a new challenge in family law towards the end of 2017.
Crypto currency in its own right can be difficult to understand particularly if you are not tech savvy. Each crypto currency has its own set of rules regulating the currency itself and the value of each crypto currency is subject to rapid fluctuation. The speculative nature of crypto currency raises concerns about how it ties into property settlements as a source of income and as an asset.
The first dilemma is that crypto currency is not tied to the identity of the user. Owners are able to quickly transfer funds between various online wallets, making it difficult to trace compared to a bank account displaying transactions and balances on a printable statement. Where the non-disclosure of parties may be salient in a matter, despite their disclosure obligations, it means that one party may be disadvantaged when seeking disclosure of their former partner’s financial position if crypto currency can be hidden as an asset or source of income.
In the event crypto currency is determined to be an asset of the matrimonial asset pool there are issues concerning the practicality of determining its value and tax consequences alike that of real property.
Where it may be argued that crypto currency can be valued like any other asset or where it is compared to public shares that can be transferred, there is concern that the rapid fluctuation that unraveled in December 2017 may pose difficulties in determining a market value. For example, in December 2017 1 Bitcoin valued at $4,000 surged to $5,000 within 60 days. Unlike shares or real property, valuations may become stale more quickly if the market continues to be unregulated and different crypto currencies have different rules in determining their values at a particular point in time.
Even once crypto currencies are valued, consideration must be given to transferring or distributing the “funds” where there are taxation implications in respect of capital gains and GST.
In the absence of case law and where crypto currency is largely unregulated, the areas of taxation, disclosure and valuing crypto currency within family law remains infant and present little certainty of how crypto currency will factor into property settlements in the future.
We can help
The family law team led by an Accredited Specialist can provide you with expert advice about property settlements. If you have concerns about what is considered a matrimonial asset call our Parramatta office to speak to our family lawyers on (02) 8833 2500.