With the value of Bitcoin recently hitting a record high of over $50,000, and Tesla's recent purchase of $1.5 billion Bitcoin, it is safe to say that the cryptocurrency world is buzzing.

That being said, cryptocurrency is volatile. The value of "coins" and "tokens" can rapidly change in a matter of seconds. Investing in cryptocurrency therefore comes with great risks. Similarly, separating or divorcing with cryptocurrency also comes with risks and it is important to be mindful of these.

What is cryptocurrency?

Cryptocurrency is a digital currency in which transactions are verified and records maintained by a decentralised peer to peer network system called a blockchain, rather than by a centralised authority (e.g. a bank). Popular types of cryptocurrency include Bitcoin, Ethereum, Ripple, Litecoin and Monero.

How is cryptocurrency treated on divorce?

In Scotland, cryptocurrency is treated like any other asset on divorce. The starting point is to determine if the cryptocurrency is "matrimonial property" (acquired by either spouse from the date of marriage to the date of separation, other than by way of gift or inheritance). If the cryptocurrency meets this definition, it will form part of the pot of assets to be divided between two spouses on divorce.

The law sets out that matrimonial property should be divided fairly, which is usually equally unless there are special circumstances to justify an unequal division. Cryptocurrency can therefore be transferred, divided, retained or sold following a separation, however not without some practical difficulties.

What difficulties may arise with cryptocurrency?

1. Tracing cryptocurrency

The first difficulty with cryptocurrency is tracing it. Unlike money held in a bank account, cryptocurrency is not stored or recorded on a centralised database. Cryptocurrency runs on a distributed public ledger called a blockchain, which allows data to be stored globally on thousands of servers. Physical property is often easy to trace – for example, residential property can be found from a quick search of the Land Register. In contrast, there is no search function for cryptocurrency which, by definition, translates to "secret money".

If you suspect your spouse has cryptocurrency but has not disclosed this, there are steps which can be taken to uncover this. Steps can also be taken to prevent your spouse from moving their cryptocurrency to conceal their assets.

2. Valuing cryptocurrency

The second difficulty with cryptocurrency is valuing it. The value of the cryptocurrency at the date of separation will fall within the pot of assets to be divided on divorce. Given the volatility of cryptocurrency, together with the regular closure of many exchanges, valuing cryptocurrency can be a difficult exercise. However, an expert can be instructed to give a subjective view on value.

Tips for dealing with cryptocurrency

If you suspect that your spouse may have cryptocurrency, here are our top tips:

  • Check bank statements for any large or regular payments to unrecognised accounts.
  • Keep a note of any conversations you and your spouse have had about cryptocurrency, including mentions of types of coins or tokens, or the names of exchanges.
  • Tell your solicitor so that steps can be taken to uncover the cryptocurrency.

If you hold cryptocurrency, here are some things to bear in mind:

  • Keep a note of all purchases, sales and transfers of your cryptocurrency, including a note of any exchanges which have closed down.
  • Do not delete any evidence of your cryptocurrency or otherwise try to conceal your cryptocurrency. This could have negative implications for you if matters proceeded to court, and the court may set aside any such transactions and take into account your conduct.

If you are separating from your partner or spouse and would like expert advice and guidance tailored to you, please get in touch with a member of our team.