During the divorce process, it is important for spouses to divide their assets and debts. That process begins by identifying assets as either separate or marital. Often the immediate focus is on the home, automobiles, retirement funds, and bank accounts. Many of these assets are tangible, but not all. With cryptocurrency evolving in 2008/2009, there is a still a lot to learn about the intangible, ever-changing world of digital assets, especially when concerning cryptocurrency and divorce.
What is Cryptocurrency?
Cryptocurrency is a digital asset; it is very liquid and operates in an open market that is not overseen nor controlled. There are no brick and mortar banks for safekeeping of one’s Bitcoin. Some of the most highly traded cryptocurrencies include assets like Bitcoin, Litecoin, and Ethereum. These funds can be used to buy things and pay for services and bills. Cryptocurrency can be spent and traded. Using cryptocurrency is done quickly and in a secure fashion, but there is no intermediary like a bank. Without that intermediary and oversight, tracing the use of cryptocurrency can be difficult. Thus, there are concerns that a spouse may resort to funneling assets and funds into cryptocurrency in efforts to hide assets and money. Much is also being discussed as to how cryptocurrency can also be used as a tool for hiding illicit activities and monies.
As such, cryptocurrency and divorce can sometimes mix like oil and water. If you don’t know where to look, it can be easy for crypto holders to hide how much they actually have through transfers to other accounts.
What should you do if you suspect that your spouse is hiding money via cryptocurrency?
One should closely examine income tax returns for a report of gains and losses of the cryptocurrency funds. Another inspection should be conducted on all bank accounts and credit accounts for large wire transfers and cash withdrawals. Large transfers, without evidence of purchases, may be a sign. Look for large purchases from vendors who accept cryptocurrency. These vendors include retailers like: Home Depot, Overstock, Starbucks, and Whole Foods. Look for recurring transfers and deposits into cryptocurrency exchanges like Coinbase, Binance, Kraken, etc. These exchange sites can serve as a method of storing large sums of money and assets. A spouse’s attorney should ask about cryptocurrencies in discovery documents and for court required financial documentation. Forensic experts may need to review the accounts as well.
How much is Cryptocurrency worth?
The value of cryptocurrency is like stock; it can fluctuate in value greatly. Experts agree that it is a volatile asset; there have been huge price and value swings since arrival in the financial world. Unlike stock, there is no right to any future income stream. There are differing opinions as to how to value cryptocurrency in a divorce. Despite the interest in this digital asset, the world’s financial market is still trying to ascertain how it fits into the more traditional financial marketplace.
But, regardless of valuation questions, cryptocurrency is an asset. And, like all assets that have been acquired in a marriage, the asset needs to be divided. If a couple is considering a separation, they could agree that on the date of separation that all digital currency will be equally divided or distributed to each spouse’s digital wallet. Then, regardless of the digital money’s value swings, each spouse has his or her share. If the division takes place at a different date, there will be valuation issues that will need to be resolved. It will be imperative that the parties consult with professionals as to division of the digital assets, along with the division of other, more traditional, assets.
Lisa has practiced law since 1987 but has also been heavily involved in legal education and writing. As a teacher at Central Carolina Community College, she has been nominated twice for Instructor of the Year. She has taught paralegal and criminal justice courses, authored legal study guides and articles for national publications, edited numerous legal studies textbooks, and consulted with legal authors on several writing and educational projects. She is also a Board member and Committee Chair for the North Carolina State Bar Board of Paralegal Certification.
