Law firm can help unravel complex digital asset issues
ADVICE
Advisors – Tilly Bailey & Irvine partner and head of the private family law Wendy Beacom ( right ) with Jessica Inman , associate solicitor within the firm ’ s private family law team .
PICTURE : JAMES HIND
Law firm can help unravel complex digital asset issues
THE CRYPTO FACTOR
Digital assets are taken into account when dealing with relationship breakdown agreements . Here , Tilly Bailey & Irvine ’ s Wendy Beacom and Jessica Inman consider some of the issues involved ...
When seeking to reach financial agreements within the context of a relationship breakdown resulting in divorce or the termination of a civil partnership , collating documentary evidence of a client ’ s financial position is key .
The step of collating financial information is expected to be reciprocal and that both parties are open and transparent in respect of their financial disclosure .
The information required to be disclosed will include evidence of property , land and business interests , bank accounts , investments and pensions , as well as sources of income .
Increasingly , though , parties ’ assets include electronic assets , in essence cryptocurrency , which bring their own challenges owing to these not being tangible assets in the same way as , say , a Revolut account , which is used to be able to use different currencies .
Where to start ? Certainly not with paper ! A party must disclose what is known as the public key to the crypto ‘ wallet ’.
A public key , in essence , is an account number and is used to receive cryptocurrency into the wallet .
For context , there is also a private key that is essentially a pin number . The holder of a private key can control , trade , or transact the crypto and it is therefore imperative for the owner of the wallet holding the cryptocurrency to ensure that the private key is not disclosed to anyone else .
For the purpose of disclosure in financial remedy proceedings , the private key is not required and only the public key will be requested .
The owning party must disclose a transactional history of the crypto . This relates both to the wallet holding the crypto and also to extend to a breakdown from the trading platforms .
As those who are aware of cryptocurrency know , it is a highly volatile market , so valuing the asset brings about significant challenges .
For example , owing to its volatility , a valuation one day could be wiped out the next . There is speculation that if cryptocurrency becomes a regulated market , then valuations will reduce as some investors will pull out . Clearly , that could hugely affect the value of a client ’ s or the other party ’ s investment .
As with all investments , though , there has to be consideration that a sale of such could attract tax on a gain in the same way as selling shareholdings .
Therefore , there should be consideration of the net value of the asset depending upon its worth at any given time .
Like any asset , cryptocurrencies can be divided . Cryptocurrencies have been determined as ‘ property ’ and the court in financial remedy proceedings can therefore order the transfer of such from one spouse to another should this be appropriate in the circumstances .
As cryptocurrencies are such volatile assets , then there are arguments to state that sharing them brings about a risk for both parties rather than one party taking the “ copper bottomed ” assets .
However , as would be expected , a lot of parties are risk averse , or simply do not understand the market .
There is also the concern that if one party takes the crypto asset , which may on the face of it seem to be the less valuable asset , what then if the value significantly increases ?
Would it be fair that the non-owning party should be compensated ? Arguably not , as they will likely have taken the more stable asset , leaving the other party with the risk that may have gone either way , in the same way as any other investments , such as shares .
Overall , though , these are assets that have to be disclosed , and those advising must be aware at all times as to the everchanging values and the volatility of the market place .
Regular updates and potentially agreeing valuations prior to a hearing can aid the court immensely .
For more information , or to speak to our private family law team , call us on 01740 646000 , or fill in an online enquiry form available via our website , tbilaw . co . uk , and someone will be in touch .
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