Cryptocurrencies like Bitcoin and Ethereum have exploded in popularity over the past decade, raising new questions and creating new laws about how to handle virtual currency.
One area that has raised some especially interesting questions about cryptocurrency is divorce law. When a couple has crypto, how is it divided in a divorce? If one person in the couple holds cryptocurrency, do they have to disclose it with their assets? While dividing crypto isn’t as clear cut as dividing a savings account or money from the sale of the marital home, there are some guidelines.
First, let’s discuss why dividing crypto is difficult.
Why It’s Harder to Divide Cryptocurrency
There are a few things that make crypto tricky to divide in a divorce settlement.
First, the value fluctuates dramatically, even more so than stocks. For example, the value of a single Bitcoin soared to over $18,000 USD in December 2017. By February 2018, the value of Bitcoin had fallen by over 50% to $7,600. If someone declared their assets and included the Bitcoin in December 2017, that declaration would be incorrect just two months later. It would not be fair to ask them to split the value of the Bitcoin in December when it was worth less than half that in February.
Because the value in USD is so volatile, some courts have taken to dividing the cryptocurrency itself. For example, if your former spouse owns 10 Bitcoin and 20 Ethereum, you may be awarded 5 Bitcoin and 10 Ethereum in your settlement. This is no doubt an easier way to divide crypto, but there may still be an issue since cryptocurrency isn’t kept in bank accounts.
This is one of the other big issues in dividing cryptocurrency: how it is stored. Crypto is kept in a virtual wallet, which most people do not have and some are not comfortable setting up. This makes it difficult to award cryptocurrency to the other party in the divorce. If someone is unwilling to set up a wallet to receive their share, the judge may be forced to make another judgement altogether.
How Do You Split Crypto in a Divorce?
Most people either don’t own cryptocurrency, or they don’t own enough for it to be a big deal in a divorce.
But for those that do own crypto, there is no open and shut way to split it in divorce. This doesn’t mean that you (or your spouse) will get to keep all of it, free and clear. It just means that attorneys and judges are still figuring out the best way to handle it.
Although there aren’t many guidelines on how it is split in a divorce, one thing is for certain: crypto is considered tangible property, so it is expected that you will disclose it.
Not disclosing it could be seen as an attempt to hide assets, which comes with major consequences. Many people think that because cryptocurrency is still not widely understood by most people and it is held in a virtual wallet that hiding it or using it to hide assets will go undetected. This is not the case. A good forensic accountant can uncover cryptocurrency no matter how well you think you’ve hidden it. It’s best to always disclose it up front.
Let the Attorneys at The Doyle Law Group Ensure Your Crypto is Divided Fairly
If cryptocurrency is a factor in your divorce, it’s best to consult with a divorce attorney. The team at The Doyle Law Group has been helping clients in Raleigh through divorce for over 15 years. Schedule your consultation today by calling (919) 263-5629 or by filling out the contact form below.
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