Control-Alt-Disclosure: Disclosure Challenges Of Crypto Assets

• Published date: 30 November 2022
• Subject Matter: Technology, Fin Tech
• Law Firm: Lerners
• Author: Ms Sahar El-Kotob

Also authored by: Waseem Shahatto

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It is an undeniable reality that the growing popularity and prevalence of crypto assets (such as cryptocurrencies and non-fungible tokens ["NFTs"]) will increasingly impact how individuals manage their finances, prompting questions and concerns related to financial disclosure of these illusive assets in the family law context. While limited court decisions provide some insight into how non-disclosure of cryptocurrencies in separation proceedings may be addressed, many challenges remain in ensuring that parties are accurately disclosing their digital assets.

Brief Explanation of Crypto-Assets

Crypto-assets, are digital assets that rely on blockchain technology (a shared ledger) to facilitate the process of recording transactions and tracking assets across several computers that are linked in a peer-to-peer network. Crypto assets are decentralized, which means that they are not controlled by one single authority. While a decentralized structure allows more financial independence without governmental regulation, it is the reason why crypto-assets have no intrinsic value since they are not backed by any central authority, such as a financial institution, making them a volatile asset. Yet, individuals are still drawn to it as it's perceived to be a method to raise capital quickly through the internet.¹

The Importance of Accurate Financial Disclosure for the Purpose of Equalization

Fulsome and accurate financial disclosure is essential to resolving issues after separation. Generally, when parties separate, they are entitled to what is called the equalization of net family property. Each spouse is required to equally share the property accumulated throughout the marriage. Net family property is calculated by comparing assets and debts from the beginning of the relationship to the date of separation for each spouse. Each spouse adds up the value of their property less any debts on the date of separation. From this, they subtract the value of their property less any debts on the date of marriage. Save for some exceptions, the spouse with the higher net family property then pays the other spouse half of the difference. This is known as the equalization payment.

Accordingly, to...