Managing Attorney Noh Jong-eon | Hankyung Law & Biz Law Street Column

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Virtual Assets: Clearly Property in Legal Terms

In the column, Managing Attorney Noh Jong-eon analyzes the reality that, as virtual asset investing has become mainstream, property disputes involving virtual assets are rapidly increasing in divorce and inheritance cases. Courts recognize virtual assets such as Bitcoin as clearly property and treat them as subject to division and inheritance (see, e.g., Suwon District Court, Seongnam Branch, Decision 2017Ddan208215, rendered Jan. 24, 2018). Because they can be exchanged for cash and have clear property value, if they were formed through the couple's joint efforts during marriage, they are being included in the scope of property division upon divorce, and if they belonged to the decedent, they are increasingly recognized as inherited property.

Assets on Overseas Exchanges Are a 'Blind Spot of the Law'

According to Managing Attorney Noh Jong-eon's column, while asset inquiries to domestic exchanges such as Upbit and Bithumb have become standard practice in divorce and inheritance matters, it is very difficult in practice to uncover assets hidden on overseas exchanges such as Binance and Coinbase. If they are stored in a personal digital wallet (cold wallet), they are extremely difficult to identify, and although information disclosure may be requested from the court of that country through international judicial assistance procedures, the process must go through diplomatic channels and can take from several months to several years. In civil cases, the foreign court often refuses on grounds such as its own personal information protection laws.

Limits of the Current Tracing Methods

In practice, the main approaches used are to order the other party to submit details of their virtual assets through a property disclosure order and impose disadvantages if they fail to comply, or to indirectly prove ownership by tracing funds that flowed from domestic banks or exchanges to overseas exchanges. However, Attorney Noh Jong-eon points out that, given the nature of complex virtual asset transactions, funds pass through multiple stages, making perfect tracing virtually impossible.

Institutional Improvements Are Urgently Needed

Managing Attorney Noh Jong-eon concludes the column as follows. Disputes related to virtual assets are expected to increase further, and demand in divorce and inheritance cases for identifying the location of virtual assets and treating them as assets subject to division will continue to rise. Building an information-exchange system with overseas virtual asset exchanges, simplifying international judicial assistance procedures in civil cases, and establishing special rules for resolving virtual asset-related disputes are urgent tasks. As the virtual asset economy expands, the legal system responding to it must also evolve quickly.

"Family Law Unboxing" The series is regularly serialized in Hankyung Law & Biz Law Street of The Korea Economic Daily. Attorneys Yoon Ji-sang and Noh Jong-eon, the managing attorneys at Jonjae Law Firm, take turns explaining key issues in divorce and inheritance based on their practical experience.

 Watch the video on Jonjae Law Firm's YouTube 'Family Law Unboxing' channel