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In fact, dividing the crypto assets held by one party is not a new problem. As early as around 2010, some scholars raised this question.
However, there is still no clear answer to this question today.
This is mainly because in my country’s judicial cases, there is still little practice in the issue of crypto assets division. Even if one party claims that the other party holds crypto assets with huge economic value in the lawsuit, the court often considers the reality of difficulty in execution and often refuses to deal with it on the grounds such as inability to value and the state prohibits circulation.
Today, the Sa Jie team will talk to you about this issue from the perspective of both parties based on judicial practice experience.
01 Whether crypto assets are divisible joint property of husband and wife
Many partners have misunderstandings about crypto assets, mainly because of the negative evaluation of crypto assets in the “Notice on Further Preventing and Disposing of Speculation Risks in Virtual Currency Transactions” issued by ten ministries and commissions in 2021.
But in fact, the property value of crypto assets has been widely recognized in my country’s long-term judicial practice (see Criminal Trial Reference” Case No. 1569 Reason for judgment: Although virtual currency (cryptocurrency) does not have legal currency status, it has property attributes in the sense of criminal law).
Therefore, although crypto assets (especially cryptocurrencies) cannot be regarded as fiat currency at present, they do not prevent them from being treated as a special virtual property.
From the perspective of marriage and family affairs, Sa Jie’s team believes that it can become the joint property of the couple and should be divided during the divorce process.
According to the provisions of Article 1062, paragraph 1 of the Civil Code, the so-called [co-property of husband and wife] refers to the income obtained from production, operation and investment during the period of marriage.In addition, Article 25, Paragraph 1 and Article 26 of the “Interpretation of Marriage and Family Compilation of the Civil Code (I)” also once again clarified that the income obtained by one spouse’s investment belongs to the joint property of the husband and wife, and the income from the personal property of the spouse after marriage. In addition to interest and natural value-added, it should be recognized as the joint property of the husband and wife.
As can be seen above, the crypto assets obtained by one spouse during the marriage should be the common property of the spouse and should be divided during divorce.
02Difficulties in judicial practice of cryptoasset segmentation
(I) It is difficult to prove that the other party holds crypto assets
Crypto assets themselves have a certain degree of anonymity. The current common USDT, USDC, BTC, and ETH are either stored in online hot wallets of major exchanges or stored in cold wallets that they physically hold.At the same time, crypto assets also have technical characteristics such as anonymity (the public key does not display the holder’s identity), peer-to-peer global instantaneous transactions.
Therefore, it is necessary to prove that: (1) someone holds a specific crypto asset wallet/account; (2) the crypto assets in a specific crypto asset wallet/account belong to someone.It is not easy for ordinary residents.
Even in a criminal case, it is not easy to prove that “someone holds crypto assets.”Professional investigative agencies often need to prove this fact through the cooperation of criminal suspects + sorting out massive transaction data (such as Jinxi as evidence), and establish a causal relationship between the criminal suspect and the criminal act.
Therefore, in the process of dividing divorce property, if one party only knows that the other party holds a large amount of crypto assets, there is no way to request judicial division.
(II) It is difficult to estimate crypto assets
There are many types of crypto assets and different pricing methods.
For stablecoins such as USDT and USDC, pricing is relatively simple, and the assets they anchor are mostly legal currencies or specific assets in other countries with stable value and extremely low volatility.Taking USDT as an example, it is converted to USD one-to-one, so it is enough to directly determine the value of its property when it is divided by USD exchange rate.
For market value coins such as BTC and ETH, pricing is more troublesome. Such crypto assets mainly have large market fluctuations. Moreover, some market value coins are small and can easily lose liquidity, so it is difficult to price such market value coins.Of course, if it is a highly recognized currency such as BTC and ETH, its relatively transparent “public price” can be used for reference.
For special crypto assets such as NFT, DeFi & GameFi & XFi, it depends on the specific situation, and there is not much experience in judicial practice in the world.
(III) Difficult to implement
Partners should know that the original intention of blockchain creators is to build a financial system that can operate on its own by relying on technological trust, and decentralization is the core feature of its technology.The crypto assets established on this are naturally imprinted with this technology, which makes crypto assets a property that is highly dependent on the cooperation of holders.
Therefore, if the holder does not cooperate with the implementation, it is actually more difficult to deal with in practice.
In practice, my country’s judicial organs have no initiative in freezing, seizing, and disposing of crypto assets. They cannot directly require overseas crypto asset trading platforms and public chains to freeze an account and an account like they require banks to freeze the account of the person subject to execution, and they cannot require overseas crypto asset trading platforms to directly allocate frozen crypto assets.
Even so, the courts in my country have not established a set of ways and channels to communicate with overseas crypto asset trading platforms. A large number of executing judges are also ignorant about how to execute crypto assets, which makes the execution of crypto assets even more difficult.
03Actual practice of splitting crypto assets for couples
(I) How to Under the Current Legal Framework of Our CountrySuccessfully implemented segmentation
At present, if you want to divide crypto assets that are effective and legally guaranteed, you can only operate through a clear divorce agreement.
According to the divorce case between He and Feng by the Xicheng District People’s Court of Beijing (2021) Beijing 0102 Minchu No. 35486, He and Feng signed a divorce agreement on June 13, 2008, and clearly stipulated in the agreement that the digital currency is currently valued at 2.4 million.One person is half. Considering that the assets change too much, He is not suitable for holding it, and it is difficult to cash out.Feng promised to owe He 1.2 million yuan.When the situation improves, the debt owed by He is deposited, with a maximum repayment period of three years, and a repayment of RMB 1.2 million will be paid in three years.The loss has nothing to do with He.
Subsequently, the two parties filed a lawsuit against the court for the performance of the divorce agreement. The Xicheng District People’s Court of Beijing held that the parties involved in the case agreed on the present value, distribution amount, payment time, etc. of the digital currency in the joint property of the husband and wife in the last property distribution agreement on June 13, 2008. This is the true intention of both parties and has not violated the prohibitive provisions of laws and regulations. Therefore, the agreement is equally binding on both parties, and both parties should consciously fulfill the obligations determined in the divorce agreement.
The final judgment: Feng paid He RMB 1.2 million.
In summary, we can conclude that if both spouses really want to divide crypto assets, they must operate through a clear divorce agreement and based on consensus between the two parties, do:
(1) Value crypto assets in RMB;
(2) It is clear that one party shall use RMB to “repurchase” the couple’s joint crypto assets share;
(3) Clearly agree on payment time.
At the same time, Sa Jie’s team also suggested that if possible, the party holding crypto assets should be required to disclose the crypto assets they hold, including the wallet address, type of crypto assets, etc., for fair distribution.
(II) How to prevent one party from requesting to divide crypto assets held by the other party
In principle, according to the provisions of the co-ownership of husband and wife in our country, when divorce, the shared property of husband and wife should be divided according to law, and one spouse should not evade distribution in any improper way.Article 1092 of the Civil Code clearly states: “When divorce, if one spouse hides, transfers, sells, damages, or squanders the common property of the couple, or forges the common debts of the couple in an attempt to embezzle the property of the other spouse, when dividing the common property of the couple in divorce, the party who hides, transfers, sells, destroys the common property of the couple or forges the debts may be divided by the party who hides, transfers, sells, or destroys the common property of the couple or forges the debts. After divorce, if the other spouse finds that the above-mentioned behaviors are committed, he may file a lawsuit with the people’s court and request the separation of the common property of the couple again.”
But in practice, for various reasons, one party does have reason to be unwilling to divide the crypto assets it holds.It is difficult for honest officials to make decisions on family matters, so Sister Sa’s team does not make any comments.In practice, if both parties fail to disclose and clearly divide crypto assets through a divorce agreement, and one party cannot prove that the other party holds crypto assets in the litigation, the court will basically not judge the division, or even directly refuse to deal with it.
As mentioned earlier, although the data on the chain of crypto assets is public, it is indeed very difficult to prove that “someone holds a certain wallet”. Even if one spouse knows the public key of the other party and can see the amount of crypto assets on the account, unless the holder recognizes it, it is almost impossible to prove the ownership of the account and the crypto assets.
In practice, even if one party proves that one party does hold a certain wallet and the crypto assets in the wallet, without powerful means to freeze the wallet, the information between the two parties is extremely unequal, and the holder can explain the account fund losses by claiming “stolen”, “scamdled”, “investment failed”, etc.
Written at the end
With the expansion of the crypto asset market and the expansion of its application scope, it is rapidly entering all corners of China’s civil and commercial affairs. Subsequent matters such as handling, distribution, and segmentation of crypto assets will become more and more common in judicial practice.Our country’s judicial organs should establish a relevant processing system as soon as possible to ensure the safety of residents’ property.
