January 6, 2022 | Family patrimony / assets

Cryptocurrency: is it a loophole?

Cryptocurrency, such as Bitcoin and Dogecoin, to name a few, are forms of non-tangible, virtual currency. In Canada, virtual currency is not considered a legal tender, but is classified as property. This leads to a novel question with respect to division of property in family law – how is cryptocurrency partitioned under Quebec’s default legal matrimonial regime of partnership of acquests (i.e. in the absence of a marriage contract)?

Once all assets or property forming the family patrimony have been equally partitioned between spouses, the remaining assets or property fall within the scope of Quebec’s default matrimonial regime, partnership of acquests and are also equally partitioned between the spouses.

Read more: Rules of Family Patrimony 

In the age of cryptocurrency, parties to divorce proceedings are now facing a new hurdle, how to determine and prove the existence of crypto assets. During any divorce, spouses are obliged to provide the other spouse with full financial disclosure which includes any and all assets and liabilities. Unless spouses keep each other in the loop and are transparent with respect to the value of their digital wallet, tracing crypto assets can be extremely difficult, and many spouses are using this to their advantage.

It is possible for a spouse’s attorney to serve a subpoena or obtain a court order to search the other spouse’s computer to determine the existence and value of that spouse’s crypto assets. However, this process typically requires the expertise of a forensic investigator which can be quite costly and may only prove to be valuable if the other spouse has substantial evidence to support that their spouse has significant crypto assets.

While the issue of disclosure of cryptocurrency with respect to family patrimony has yet to be raised before a Quebec court, it has been raised and examined before the British Columbia’s Supreme Court in M.W. v. N.L.M.W., 2021 BCSC 1273.

In M.W. v. N.L.M.W., the husband held numerous crypto accounts but only revealed one in his financial disclosure. The court concluded that the husband’s crypto investments constitute property forming part of the family property and his lack of full disclosure was “particularly egregious”. The court also cited a prior Supreme Court decision where the non-disclosure of assets forming part of the family patrimony or matrimonial regime was described as a “cancer” of matrimonial litigation.

In light of the husband’s lack of financial disclosure with the goal to minimize his financial obligations towards his spouse, the judge used his discretion, and based on evidence, and attributed a value of $ 60,000 to the husband’s crypto assets.

Even if it is notoriously difficult to trace the value or even the mere existence of crypto assets, the above noted decision illustrates the act of concealing assets not only gravely undermines one’s credibility but also invites the court to use their discretion to value the assets.

With the continued increase in crypto investments, this decision from the British Columbia Supreme Court offers us a glimpse into what we can expect in terms of the disclosure of crypto assets and the partition of such assets under Quebec matrimonial laws.