May 1

Distribution of Cryptocurrency and Bitcoin in a Divorce


It is no secret that cryptocurrency is on the rise. Today, approximately 16 million Americans own at least one form of cryptocurrency.   If you are going through a divorce in New York, and if you or your spouse have acquired crypto assets either before or during your marriage, you may have questions as to how this will factor into your case.

In a New York divorce, cryptocurrency is treated like any other asset.  Most importantly, this means that owning cryptocurrency must be disclosed to the other spouse. Not disclosing cryptocurrency is as illegal as not disclosing your bank accounts. If you believe your spouse may be hiding virtual assets, some good indicators that your house is holding cryptocurrency whether your spouse has ever owned cryptocurrency, or whether he or she has ever received cryptocurrency for goods or services.

After cryptocurrency has been disclosed, there are many additional challenges.  The first is determining whether the cryptocurrency should be classified as either marital property (that will be divided at the conclusion of the case) or separate property (that will not).  If you or your spouse can prove that the cryptocurrency was acquired before the marriage, it could be considered separate property and not subject to distribution. Unfortunately, this seemingly simple piece of information can be extremely difficult to prove with untraceable crypto transactions.  

Another challenge is the difficulty of valuing cryptocurrency.  Valuing cryptocurrency can be a crucial part of the divorce process and must be done at the right time due to the asset’s volatility.  While it is the norm that assets in a divorce are valued at the time of the commencement of the divorce action, it may be beneficial to negotiate the valuation of the asset at a later date. Establishing these key pieces of information could also be a costly endeavor, as forensic experts are usually needed to decipher the blockchain to determine when the cryptocurrency was purchased and how it should be valued.

When all is said and done and it eventually comes time to divide the asset, the final challenge now becomes how to go about doing so.  There are many options that can be explored, including one spouse keeping the cryptocurrency and offering a different asset of equal value.  Other options include selling the digital currency and dividing the proceeds, or transferring the cryptocurrency on a virtual exchange.  There are positives and negatives to each option, and having the right attorney to review this with you in detail will be critical to obtaining the maximum value of these virtual assets. 

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