Lawyer Monthly Magazine - March 2020 Edition

Cryptoassets continue to grab headlines after the recent decision by a judge in the Commercial Court who found that a cryptoasset, such as Bitcoin, was a form of property capable of being the subject of a proprietary injunction. In this case, the claimant obtained an injunction against the defendants, freezing the Bitcoin. This follows on from the UK Jurisdiction Taskforce’s statement towards the end of last year that the asset class is, in principle, property under English and Welsh law. The judge’s finding was significant as it is the first judicial decision on the status of cryptoassets in this emerging area of law, rather than simply relying on guidance. We frequently find ourselves discussing cryptoassets especially given the often salacious coverage. For example, in the case of the disappearance of the founder of the fake cryptoasset, OneCoin, and the calls for Gerald Cotton’s body to be exhumed - he was the founder of Quadringa CX who died in 2018 taking £105m of cryptocurrency with him. But how much do we really understand about them? Parties to financial proceedings in family law have a duty to disclose all property and assets that they hold, which, following from the above decision, now also includes any cryptoassets. If this trend towards cryptoassets is to continue, and the take up of cryptocurrency increases, they will eventually become a significant part of financial proceedings that family law practitioners will have to get to grips with. This includes consideration of how to accurately attribute a value to them or deal with situations where one party is potentially hiding cryptoassets. This will potentially be problematic for family lawyers since, by their very nature, cryptoassets are difficult to trace and hard to value. Cryptocurrency values are unstable and therefore a valuation made at the outset of proceedings may well be dramatically different by the time the matter reaches its conclusion. Furthermore, cryptoassets are shrouded in secrecy, and as practitioners, we may have to increasingly rely on the services of forensic IT companies to track down and trace any potential assets with the associated cost. How the courts will get to grips with these issues is another question entirely. Overstretched and under resourced, how will the system cope with an increase in cases that have a cryptoasset element to them and the complexities that go hand in hand with them? 35 MAR 2020 | WWW.LAWYER-MONTHLY.COM Special Feature By Hannah Gumbrill-Ward, Solicitor at Winckworth Sherwood - Cryptocurrency has been around for about a decade, but it became more mainstream around 2017 when bitcoin skyrocketed to a price of $20,000 per coin 1 - In 2018, only 5 per cent of the American population held cryptocurrency - It is predicted that cryptocurrencies will be a significant feature in a large number of divorces - Some warn that large sums of money may be hidden via cryptocurrencies as they are largely unregulated and encrypted, but assets are still traceable when bank statements are scrutinized - Cryptocurrency has gained significant mainstream attention, accountants and matrimonial attorneys should be aware of the possibility of marital asset diversion through cryptocurrency—and should take steps to mitigate that risk 2 1 https://www.bankrate.com/personal-finance/divorce-cases-cryptocurrency-assets-new-battleground-bitcoin/ 2 http://www.nysscpa.org/most-popular-content/a-forensic-guide-to-finding-cryptocurrency-in-divorce-litigation#sthash. LDPcsxzd.VoN6llNI.dpbs Did You Know?