As digital assets like Bitcoin, Ethereum and other cryptocurrencies become increasingly mainstream, they are appearing more frequently in family law property settlements. Although the Family Law Act 1975 (Cth) does not specifically refer to cryptocurrency, the Federal Circuit and Family Court of Australia (FCFCOA) treat digital assets as property—meaning it must be disclosed, valued and divided just like any other asset.
What Is Cryptocurrency
Cryptocurrency consists of digital tokens that operate as a form of online currency, allowing individuals to make direct peer-to-peer payments without traditional banking systems.
Key characteristics include:
- No intrinsic value — its price depends entirely on what the market is willing to pay.
- High volatility — prices can surge or plummet in short time periods.
- Rapid market growth – crypto has become a common component in modern investment portfolios.
- Has no physical form – and exists only in the network.
Valuing Cryptocurrency
Valuation can be uniquely challenging due to volatility of the market. For example, Bitcoin rose from around USD $30,000 in mid-2021 to nearly USD $70,000 later that year, before falling to about USD$35,000 in 2022.
When valuing cryptocurrency, it is important to regularly evaluate the market, especially prior to any mediations or court attendances. Notwithstanding this, other factors that have the potential to complicate valuations include how digital asset are held, the lack of digital footprints when converted or transferred which allows for the opportunity to conceal the asset.
Disclosure Obligations
The duty of full and frank disclosure in family law applies equally to digital assets irrespective of when they were acquired, the worth or whether they were actively traded. The disclosure obligation is a fundamental principle in determining the party’s asset pool. As such, when cryptocurrency is concerned the party holding the digital asset may need to provide:
- Bank statements
- Exchange account details
- Records of how and where cryptocurrency is stored
- Screenshots of digital wallets
- Exchange transaction ledgers
Due to the unique nature of cryptocurrency, there is potential for concealment which adds a layer of complexity to discovery. Therefore, in complex matters, parties may need to engage forensic accountants who specialise in cryptocurrency tracing. While this can be expensive, it often provides a better reflection of the value of the digital asset.
However, should a party not disclose the asset and is found to be in breach of the disclosure obligation, the Court may:
- Reverse the burden of proof to the party who is alleged to be concealing the asset
- Adjust the property division
- Impose costs orders
One key case that deals with non-disclosure of cryptocurrency is found in – Powell & Christensen [2020] FamCA 944 (13 November 2020)
To summarise, the husband invested approximately $100,000 in cryptocurrency for personal and business purposes. During property settlement proceedings he failed to disclose any substantial documentation to indicate the value of the assets. Furthermore, he contended that the tracking of value was a ‘non-trivial’ task despite having the capacity to disclose the material to establish the chain of transactions – he simply chose not to do so. The Court determined that the purchase price should be added back to the wife’s asset pool, and due to inadequate disclosure and a lack of credible evidence, the Court inferred that the best evidence of value was the original purchase price.
Key Takeaways
- Cryptocurrency is treated as property under the Family Law Act and must be disclosed.
- Valuation is complex due to the volatile nature of the asset.
- Concealment or nondisclosure can result in serious legal and financial consequences.
- In some cases, forensic tracing maybe required.
If you are going through separation and cryptocurrency forms part of your financial portfolio seeking early legal advice is recommended to ensure your rights are protected as property settlements and family law are often complex.
The information above is general in nature and if you need tailored legal advice, please call one of our solicitors on 07 5444 4750