With cryptocurrency’s growing popularity among the public, family law attorneys may encounter questions about how to divide digital assets in a divorce. As more couples accumulate virtual money, it becomes another marital asset to be appraised and divided in divorce proceedings. Unless your attorney has a strong understanding of cryptocurrency assets, an accumulation of digital currency could result in a lengthy dissolution process.
Some of the challenges involve valuing an asset with rapid price fluctuation, and how easily the cryptocurrency assets can be hidden. It’s typical for parties to request and inspect investment accounts and bank account statements as part of the discovery process in many divorce procedures to find any assets that haven’t been revealed as required. Although most people will be straightforward about the assets they own, in some cases, some will try to hide certain assets from their spouse and the court. While concealing assets is a regular problem many divorce lawyers encounter, using and concealing cryptocurrency assets like Bitcoin is proving to be a new challenge.
Investopedia defines Bitcoin as a type of cryptocurrency that can be used to buy merchandise anonymously and offers the promise of lower transaction fees that can be operated without a middleman. While it can act like real money, these coins or tokens are not managed or governed by any central authority such as banks or governments. Industry groups estimate that there are more than 20 million Americans who may own cryptocurrency, with its popularity soaring. As of April 2121, there are more than 10-thousand different types of cryptocurrency.
According to the IRS website, virtual currency is treated as property and general tax principles applicable to property transactions apply to transactions using virtual currency. Recent reports indicate that Bitcoins are now the latest innovative method for hiding money so that it can’t be found when it comes to dividing the marital estate. Due to the anonymity of Bitcoins, many try to illegally withhold wealth by filtering money into their digital currency. If you suspect that your spouse is being dishonest in disclosing all their assets during the divorce process, especially high-worth assets such as Bitcoin, it may be time to hire an attorney who has experience dealing with cryptocurrency disputes.
DivorceMag.com states another reason why cryptocurrency can be an issue during the divorce process is that since no bank holds cryptocurrency, there are also no financial institutions where records can be requested to obtain information about the holder of the currency unless the holder chooses to purchase or hold their currency using an exchange. Although difficult, it is possible to subpoena an exchange for information, however, a spouse who is motivated to hide cryptocurrency can easily transfer the private keys from exchanges to a wallet that is not easily tracked.
Although some attorneys may treat Bitcoin like any other asset in a divorce, it is not your typical asset, and the exchange and value can be complex. The rapid rise of their value and popularity shows how volatile the cryptocurrency market is, and it has made the process of dividing assets during the divorce proceedings more complicated. Those who are divorcing and suspect that their spouse is holding cryptocurrency or maybe hiding assets should consult with an attorney who has experience dealing with digital assets to ensure that their rights are protected.
by Debra Schoenberg