Digital currency drives change in family law with warring parties told to give up password, two-factor authentication

The rise of digital currency is reshaping family law with warring exes fighting over cryptocurrency and NFTs forced to handover passwords and recovery phrases.

A rise in digital currency is reshaping family law proceedings and in some cases spurring judges to compel feuding parties to disclose sensitive access details such as passwords, recovery phrases and two-factor authentication.

Leading family lawyer Michael Tiyce said digital assets are shifting perceptions of ownership and creating “grey areas” in property and family law in Australia.

He said there had been a rise, too, in crypto accountants being engaged to track assets.

The new-age ownership includes things such as unique digital assets or non-fungible tokens (NFTs) and cryptocurrency like Bitcoin.

It’s estimated that almost a quarter of Australians now own digital assets with a Tech Council of Australia-commissioned report predicting these assets will contribute $60 billion each year to the country’s GDP by 2030.

“In the family court, cryptocurrency or NFT digital real estate, which is also what it’s called, is simply dealt with as an item of property,” the Tiyce and Lawyers principal said.

“However, usually, cryptocurrency is more difficult to access than simply going to the bank … there will be passwords, or there might be phrases that are used.”

Family law specialist Michael Tiyce has detailed a rise in issues around digital assets. Picture: Supplied

Mr Tiyce said legislation had failed to keep pace with the digital real estate trend but judges were finding ways to respond, especially when one party failed to properly disclose the value of digital assets.

“(In response) what we’re now seeing is that the court will be pretty determined to make sure that these digital assets are protected in the same way as any other asset – such as property, cash or shares,” he said.

Mr Tiyce pointed to a recent dispute between a warring husband and wife – he hadn’t divulged cryptocurrency and she wanted access to it.

Bitcoin is among the most popular cryptocurrencies. Picture: iStock

While the judge didn’t allow this, he did order the husband hand over his cryptocurrency to a third party.

“(He was ordered to) hand over all his passwords and private keys, recovery phrases, and two factor authentication associated with his cryptocurrency to a third party trustee,” he said.

“The effect of the order is the same as making someone withdraw all their cash from the bank and giving it to a third party until the court can figure out what to do.”

Mr Tiyce said the “invasive and intrusive” order would likely have been avoided, had the digital asset’s worth been appropriately detailed.

“It is about protecting the integrity of the court process … in the same way the court can compel the provision of any account details or superannuation details,” he said.

“Very often you will need to get crypto accountants involved, so people who are used to dealing with and valuing these assets … lawyers will work hand in glove with experts, whether that is a forensic accountant or someone in the crypto sphere to actually figure out a solution to whatever the problem is.”