'What happens if my husband said he bought Bitcoin'... What happens in a divorce [Noh Jong-eon's Family Law Unboxing]

Court "Bitcoin recognized as divisible asset"

Legal sanctions for non-compliance with property disclosure order

Cold wallets and overseas exchanges face tracking difficulties

Legal community "Urgent need for international cooperation and system improvement"

U.S. President Donald Trump recently declared at the Crypto Summit held at the White House that "the United States will become the world's Bitcoin superpower and the capital of virtual currency, and will stockpile it as a strategic asset at the national level." As such, virtual currency has established itself as a major theme in modern society alongside AI.

In Korea, investment in virtual assets (cryptocurrency) is also becoming popular. Investment in virtual currency has become commonplace to the extent that the daily trading volume of virtual assets in Korea is close to the daily trading volume of the stock market.

Virtual assets are clearly property under the law

Accordingly, property disputes surrounding virtual assets are increasing in divorce or inheritance processes. The court recognizes virtual assets such as Bitcoin as clear property and considers them subject to division and inheritance (Suwon District Court Seongnam Branch 2018. 1. 24. Judgment 2017dandan208215, etc.).

Currently, the court includes virtual assets as subject to property division if they were formed through joint efforts during marriage, and recognizes them as inheritance property if they were owned by the deceased. This is in line with the Inheritance and Gift Tax Act, which specifies virtual assets as taxable objects.

Accordingly, it is becoming standard practice in divorce and inheritance to include property inquiries at domestic exchanges such as Upbit or Bithumb as property subject to division.

Assets in overseas exchanges are 'blind spots of the law'

However, it is practically very difficult to find assets hidden in major overseas exchanges such as Binance or Coinbase. This phenomenon occurs because the 'tracking ability' of the law cannot keep up with the pace of technological development, showing that virtual currency can be misused as a new channel for hiding assets.

The biggest problem is 'locating' virtual assets. Assets stored in domestic exchanges such as Upbit and Bithumb are relatively easy to track due to obligations such as reporting to the Financial Intelligence Unit (FIU), but it is extremely difficult to identify them when stored in overseas exchanges or personal electronic wallets (cold wallets, etc.).

In particular, virtual assets deposited in overseas exchanges are practically 'blind spots' where direct evidence investigation by Korean courts is difficult. Theoretically, information provision can be requested from the court of the relevant country through the 'international judicial cooperation' procedure, but this is complicated by diplomatic channels and takes at least several months to years. Moreover, in many cases, the foreign court is passive about providing financial information in civil cases or refuses due to domestic laws (such as personal information protection).

Limitations of current tracking methods

In this situation, in practice, the method of ordering the opposing party to directly submit virtual asset details through a property disclosure order and imposing disadvantages in case of non-compliance, or indirectly proving possession by tracking the flow of funds from domestic banks and exchanges to overseas exchanges, is mainly used.

However, it is practically impossible to perfectly verify the movement path of funds or virtual assets through such indirect methods. Due to the complex nature of virtual asset transactions, the flow of funds can become more difficult to track as it goes through multiple stages.

Increasing need for institutional improvement

As times change, disputes related to virtual assets are expected to increase further. In particular, the demand to identify the location of virtual assets in divorce or inheritance and to make them subject to division is expected to continue to increase.

There is an urgent need to establish an effective international cooperation system to identify this and improve the legal system. In particular, establishing an information exchange system with overseas virtual asset exchanges, simplifying international judicial cooperation procedures in civil cases, and preparing special regulations for resolving disputes related to virtual assets under domestic law are emerging as urgent tasks.

In the legal community, there is a growing voice that the limitations of the current system should be recognized, international cooperation should be strengthened, and a new legal framework suitable for the characteristics of virtual assets should be established. As the virtual asset economy is expected to expand further in the future, the legal system responding to this needs to evolve quickly.

Noh Jong-eon, CEO of Law Firm Jonjae, graduated from Seoul National University College of Law, passed the 48th bar exam, and completed the 40th Judicial Research and Training Institute. He has accumulated various legal practice experiences while serving as the head of the legal team at IBK Industrial Bank and Mirae Asset Global Investments. Later, as the legal representative of the late Goo Hara's family, he led the legislative petition for the 'Goo Hara Act' and received the Minister of Justice Award in 2021. Currently, he is the CEO of Law Firm Jonjae, a registered director of the Animal Freedom Coalition, and an advisor to the Compensation and Insurance Division of the Administrative Appeals Integrated Advisory Group of the Anti-Corruption and Civil Rights Commission, and provides legal advice on numerous TV programs. Together with his college classmate and co-representative of Law Firm Jonjae, lawyer Yoon Ji-sang, he runs the YouTube channel 'Inheritance Unboxing'.