Elon Musk said this week that Tesla could accept Bitcoin as payment again once the energy used to mine the coins is sufficiently ‘clean’. The crypto market surged and it was time for champagne for some crypto owners. The trouble is that next week Elon Musk could say something else – maybe just for kicks – and the market could plummet. Cancel the party. Of course, even without Elon Musk’s interventions, cryptocurrencies are famously volatile. As the Governor of the Bank of England put it recently: “I’m going to say this very bluntly again, buy them only if you’re prepared to lose all your money.”
Crypto still seems to be surrounded by a lot of uncertainty and cynicism. Some are keen to dismiss it as a bit of a fad. Maybe it’s partly because it can be hard to understand what is going on and what it all actually means. Some of the terminology is bewildering. But there’s already little doubt that cryptocurrencies are no fad and are here to stay. Family lawyers are going to have to be up to speed and understand these assets when crypto is in ‘the pot’ (or might be). I am sure there are going to be more cases where crypto-assets are on paper one of the most valuable assets in a case. How they are dealt with will be the crucial point and priority for some clients. I have seen crypto cropping up in cases increasingly often and have found it interesting to see how passionate and hopeful some clients are about this particular investment.
The first problem will be proving if a crypto-asset actually exists (easier said than done in a lot of cases). Lawyers will then need to look at what it is ‘worth’ (today) and consider the tax position. But we will then want to know what it is worth next month on the hearing date, which could be totally different. Ideally, you would have an idea of what it will probably be worth, more or less, much further down the line, but with crypto-assets that is genuinely up in the air. As the case proceeds, there may well be disclosure problems and a need for ‘crypto-expert’ input, or potential applications for freezing injunctions (particularly interesting when crypto is the target); there could be huge fluctuations in value during the case, and in the end there is the complexity of weighing it all up in settlement negotiations.
How we deal with these assets, especially in acrimonious cases, is a new and difficult problem. It will only become more important for lawyers and judges alike. That is perhaps the one thing you can safely predict.
Despite bitcoins recent rise, it is still trading about a third lower than the record high of $63,000, which it reached in April. A year ago, bitcoins value was under $9,500.
Earlier in June, the Central American country of El Salvador became the first in the world to adopt bitcoin as legal tender, as part of its technology-loving presidents proposals to use the cryptocurrency to promote 'financial inclusion, investment and economic development.