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Bitcoin is becoming a "nightmare" for divorce lawyers

You take the house; I'll take the kids and the cryptocurrency.

A U.K. firm is warning of a “looming divorce nightmare” as spouses quibble over the value of bitcoin and other cryptocurrencies that can fluctuate wildly.

The law firm Royds Withy King says it has seen a flurry of cases recently involving disputes over cryptocurrency holdings, one of which was recently valued at $1.4 million.

The firm said it is currently working on three separate high-value divorce cases where spouses are seeking the disclosure and a potential share of cryptocurrency assets.


“These are the first cases we have seen, and we expect to see many more. There will also be those divorces where a spouse may not have disclosed such assets, leaving a traceability nightmare,” Vandana Chitroda, a partner at Royds Withy King, said in a blog post published on Valentine’s Day.

In all three cases, the husbands had invested in cryptocurrencies including bitcoin, litecoin, ripple, and ethereum.

The recent flurry of media interest and mainstream investment in cryptocurrencies has led to increased awareness, and that has meant it has become more of an issue for separating couples.

Adding to the problems for lawyers dealing with such cases is the relative lack of direction given by courts, primarily due to the recent upsurge in interest in this area.

Depending on when investments were made, the value of these assets will have exploded in the last 12 months. The price of bitcoin, the most high-profile cryptocurrency, went from $1,000 at the beginning of 2017 to an all-time high of $20,000 in mid-December — before losing much of that gain in recent weeks.

According to Royds Withy King, one case they are dealing with involves an investment of £80,000 ($112,000) in November 2016. The company says that same investment was worth £1 million in December 2017, and is currently worth £600,000.

“This presents a real challenge when valuing cryptocurrencies. Valuations will have to be carried out a number of times during the divorce process as the case progresses,” Chitroda said.

But the inherent nature of cryptocurrencies — which are typically traded anonymously on a decentralized network without the need for a bank account — makes it difficult to discover the nature of a partner’s investment or holding.

“Tracing cryptocurrencies could be enormously time-consuming and expensive,” Mark Philips, another partner at Royds Withy King, said. When cryptocurrency is purchased directly and moved offline, it becomes almost impossible to trace,” said Phillips.