When a couple owns—or might own—cryptocurrency, many divorce attorneys fail to understand the effect this can have on asset division. Because it is a form of currency, assets like Bitcoin can be divided like other currencies, and certain aspects of that division are straightforward. Other aspects are not.
Cryptocurrency is also a popular tool for spouses who want to try to hide assets in divorce. If you suspect your spouse might want to secure extra property without your knowledge, this is definitely a factor to investigate. You should work with a legal team that understands the challenges when cryptocurrency is involved in a divorce. West Family Law Group has been working with complex financial assets like cryptocurrency for years, so we are prepared to protect your interests when it comes to cryptocurrency in divorce.
The Basics About Dividing Cryptocurrency
Cryptocurrency such as Bitcoin, Ethereum, and Tether is a type of liquid asset. As with any asset, the first step is to determine whether it is marital property or separate property. If it was acquired during the marriage, it would usually be marital property to be divided.
However, if it was purchased with funds one partner owned before marriage and that were kept separate from joint accounts, it is possible a court could rule that it is separate property belonging solely to one spouse. Any increase in value created by actively trading the currency could potentially be treated as marital property. The issue can become complicated quickly.
Assuming the cryptocurrency is a marital asset, some options for handling it during divorce include:
- Divide it in kind – each spouse gets the same number of units of cryptocurrency
- Set a value and give the other spouse an offsetting asset
- Sell the cryptocurrency and divide the proceeds
- One spouse maintains the cryptocurrency with an agreement to divide proceeds when the value reaches a certain amount
While Bitcoin and other cryptocurrencies can be treated like dollars or other currency in theory, the practical concerns make division challenging. The value of cryptocurrency fluctuates wildly, so the time used to set the value is crucial. In addition, the type of currency and method of storage can affect the means of accessing and dividing it.
Cryptocurrency appeals to a certain type of investor, and many people do not understand the technical aspects. Often one spouse may actively participate in the cryptocurrency market while the other has very little comprehension of how much money is involved and how it can be accessed.
It is very easy for a partner to hide the investments completely. Cryptocurrency has no physical presence and no central registry. Whoever holds the private key controls access to cryptocurrency assets, and often buyers and sellers work through platforms that actually hold the key, while they only control a password that allows them to direct the actions of the key holder.
This means that finding cryptocurrency assets is not always easy, but forensic accountants have developed some successful strategies for locating hidden cryptocurrency in divorce. Some first steps would be to review bank and credit card transactions to look for mention of a known cryptocurrency exchange. Checking a spouse’s phone or other electronic devices for a digital wallet app or cryptocurrency exchange app are also good initial steps.
If a spouse is secretive about bank statements or accounts show usual large cash withdrawals or payments to a site like Amazon, those could also be signs of an attempt to hide cryptocurrency. One common money laundering tactic is for one person to make significant purchases on Amazon for another person who then pays them in cryptocurrency. If it is possible that significant sums are hidden in cryptocurrency, it might be worth investing in the help of a blockchain forensics expert with the right tools and knowledge to track assets.
Work with a Divorce Lawyer Who Understands Cryptocurrency
The bottom line is that if your marital assets include Bitcoin or other cryptocurrency, or you suspect your partner might be hiding assets that could include cryptocurrency, you need to make sure your attorney is prepared to do what it takes to protect your interests.
At West Family Law Group, our experience handling complex financial issues in divorce enables us to develop creative strategies for finding hidden assets and allocating intricate resources in a way that helps our clients reach their goals without sacrificing peace of mind. To talk to us about the ways we could assist in your situation, contact our team to schedule a confidential consultation.