With the increasing prevalence of cryptocurrency holdings by Australians (with an estimated 1 in 4 Australians owning cryptocurrency)[1], it is important to be aware of the treatment of cryptocurrency by the Court in your family law matter.
Like any asset, cryptocurrency attracts certain disclosure obligations during property proceedings. Rule 6.01[2] imposes a broad general duty on each party to give full and frank disclosure “of all information relevant to the proceeding, in a timely manner”. The Court has made it clear that this duty extends to cryptocurrency (see, for example, Muir & Rodelo (No 2) [2023] FedCFamC1F 845 (“Muir & Rodelo”); Rasheem & Rasheem [2022] FedCFamC1F 248).
It is important to be aware of any cryptocurrency you believe your former partner may control – particularly if it is kept in a ‘cold’ wallet. A cold wallet is an entirely offline storage device for cryptocurrency, such as a USB. It is portable and extremely secure, which can also be a disadvantage – if the password (“key”) to the storage device (or the storage device itself) is lost, the cryptocurrency can become inaccessible.[3] Lost cryptocurrency (or hidden cryptocurrency, which one party has sought to retain without proper disclosure) can have addback implications on your property balance sheet – as was the case in Muir & Rodelo.[4]
Conversely, ‘hot’ wallets are often web-based, with crypto exchanges such as CoinSpot or Binance facilitating the purchase and sale of cryptocurrencies. These exchanges typically provide users with free reports to assist with tax returns and allow for the complete transaction history of an account to be downloaded – which can be of assistance with your disclosure obligations in a family law matter.
It is generally accepted, and the Court has held, that cryptocurrency is often the subject of significant fluctuations in value.[5] As such, it is important to obtain frequent, up-to-date valuations of any cryptocurrency holdings. Additionally, the disposal (sale) of cryptocurrency can have capital gains tax (CGT) implications[6] – an important consideration during property proceedings.
Whether you are seeking to retain your crypto holdings or are concerned your partner may be hiding cryptocurrency from the property pool – if you are considering separating and need expert advice, contact our team at Richardson Murray for a free initial consultation.
[1] https://www.statista.com/statistics/1244739/australia-cryptocurrency-ownership; See also https://swyftx.com/au/blog/australian-crypto-survey-2023.
[2] Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
[3] While there are additional potential ‘backup’ and recovery options to allow access to crypto wallets even after a key or USB has been lost (such as mnemonic seeds), this article does not intend to address those specifics.
[4] See also Woodward & Woodward [2023] FedCFamC2F 828; Fallins & Fallins [2022] FedCFamC1F 495.
[5] Macvean & Manton (No 2) [2022] FedCFamC1F 689 at [139].
[6] See, for example, Cahill & Cahill [2022] FedCFamC1F 53.
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