Dividing all the property acquired during the marriage can be a challenging process in any divorce.
Cryptocurrency, like Bitcoin and Ethereum, complicates this process even more as most spouses, family
lawyers, judges, and financial experts don’t understand this new technology. Over the last few years,
Bitcoin has especially increased in popularity, becoming a substantial financial asset for nearly thirty
million Americans. Because Bitcoin addresses are anonymous, Bitcoin is becoming an increasingly
common way for spouses to hide their money; by investing in Bitcoin rather than holding money in a
traditional bank account. The idea is that the other spouse who isn’t familiar with cryptocurrency would
not be able to trace these assets, and, as a result, would end up with a lesser share of marital assets. To
ensure that the property division is fair, it is important for family law attorneys to be aware of the risk
and take the steps necessary to ensure that the other party is disclosing their cryptocurrency holdings.
What is Cryptocurrency?
Cryptocurrency is a relatively new payment system that operates in a completely different way
than traditional financial systems. Unlike traditional systems, cryptocurrencies don’t rely on banks or
other intermediaries to verify transactions. Instead, cryptocurrencies use blockchain technology, a
distributed and decentralized public ledger that stores and verifies transactions in a peer-to-peer
manner. Instead of banks, users store and secure their crypto assets in online wallets. These online
wallets make it extremely easy for users to transfer and conceal funds as they don’t reveal anything
about the user’s identity. However, anonymous wallet addresses can become fully transparent if traced
and linked to a real-world identity.
Tracing Bitcoin
The first step in tracing crypto wallets is determining whether or not your spouse has invested in
any cryptocurrency. Usually, but not always, crypto assets are disclosed in discovery. Discovery is the
process where one party request information and documents from the other party. In Idaho, divorcing
couples are required to exchange information about all assets and debts, including investment accounts,
retirement accounts, bank accounts, tax returns, and credit card statements. If cryptocurrency
information is not provided in discovery, your divorce attorney will need to get creative to obtain this
information as standard methods of discovery won’t usually work. This is because a person’s
cryptocurrency portfolio can’t always be collected from any brokerage or financial institution. Its
value won’t be reflected on any bank or credit card statement.
My Bitcoin, Your Bitcoin, or Our Bitcoin?
Once the cryptocurrency assets are successfully traced, they need to be identified as either separate or
community property. Because cryptocurrency is treated like any other asset, it belongs to one or both
spouses. Idaho is a community property state, which means that any asset that is acquired during the
marriage is owned by both spouses equally. If the cryptocurrency was not purchased during the
marriage or was given as a gift or through an inheritance, then it will be considered separate property.
In some cases, the increase in the value of the crypto during the marriage may be deemed community
property.
Determining the Value of Bitcoin
If the cryptocurrency is deemed community property, the next step is valuing the holdings. The
cryptocurrency market is extremely volatile, which can complicate things when trying to divide Bitcoin
and other crypto assets evenly. The first step is determining the date when the cryptocurrency assets
should be valued. Parties may decide to value the cryptocurrency on the date of divorce, the date a
mediation agreement is signed, or on the date when the Bitcoin or other cryptocurrency is sold for cash
or transferred into a stablecoin.
Dividing Bitcoin in a Divorce
Parties in a divorce can divide Bitcoin and other cryptocurrencies by either transferring half of
the holdings to the other spouse, cashing out and splitting the proceeds, or valuing for offset. If you
decide to split the Bitcoin holdings, you will need to create your own crypto wallet and then send your
spouse the public address associated with your wallet to make the transfer possible. If you don’t feel
comfortable holding Bitcoin, you may go with the second option and request that your spouse sells your
half and transfer cash to you instead. Lastly, you can demand an offset for the value of your portion of
the cryptocurrency; meaning, if you and your spouse agree that he/she should keep the Bitcoin, they
will have to give you other marital property with the same value.
Let Gordon Delic & Associates Help!
We’re seeing more and more deceptive spouses that are hiding cryptocurrency assets in their
divorce, including both high-net-worth individuals and those who invested early in this new technology.
If you’re going through a divorce, it is important for you to know if your spouse is invested in Bitcoin or
another cryptocurrency to ensure that the property division is fair and just. The more knowledgeable
that your spouse is in crypto, the more likely it is that they may be hiding assets. Because most divorce
attorneys and financial experts are not familiar with this new technology, it is crucial for you to hire an
attorney who is knowledgeable on cryptocurrency matters. Our office specializes in cryptocurrency –
our attorneys can trace cryptocurrency wallets, demand proper valuation, and set up a crypto wallet to
make any division possible. If you suspect that your spouse is hiding Bitcoin and/or other cryptocurrency
assets, give us a call today.
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