Cryptocurrency has been skyrocketing in popularity recently. Once only the territory of savvy tech investors, today digital currency like Bitcoin is an asset to which anyone can have access. This type of currency is unregulated and volatile in value, but right now it’s hot and trading high. Controversial or not, if your spouse purchased cryptocurrency during your marriage, it’s likely a marital asset. Cryptocurrency is also very easy to conceal, and difficult to find if you don’t know where to look for it.
What is cryptocurrency, exactly?
Generally, cryptocurrency is any type of digital or virtual currency. They’re like digital tokens that you purchase with actual money that you can exchange online for goods and services. The most popular type is Bitcoin, but there are many other types of cryptocurrency. According to Nerdwallet, there are more than 6,700 different cryptocurrencies currently traded publicly, with a total current value of $2.2 trillion. They list the top five cryptocurrencies and their value as of April 2021:
- Bitcoin: $1.2 trillion
- Ethereum: $263.4 billion
- Binance Coin: $87 billion
- XRP: $81.8 billion
- Tether: $45.4 billion
One of the advantages of cryptocurrency is its security and lack of central governing authority, like a bank. Cryptocurrency works using blockchain technology, which is sort of an online database that stores all transactions. Units of cryptocurrency are tracked using a public key, kept in a virtual wallet by the owner. This wallet can be anything from a third-party piece of software to store the key to a piece of paper where the owner writes down the number. (Losing your virtual wallet can result in losing millions of dollars – just ask Stefan Thomas.)
Is my spouse hiding cryptocurrency?
During the asset division portion of a divorce, one of the first steps is dividing property into separate and marital. Anything acquired during the marriage is typically considered marital property, and this does include investments and currency like Bitcoin. You and your spouse are required to disclose all of your assets during this process. Cryptocurrency may be difficult to find if your spouse is not being upfront about all of their assets.
If you suspect your spouse may have cryptocurrency assets, look for things like cryptocurrency exchange apps on your shared cell phone plan, large online purchases with nothing to show for them, patterns of small withdrawals from the bank, email receipts, and secretive behavior with bank statements. Your divorce attorney can work with a forensic accountant to investigate any potential hidden assets during the discovery portion of asset division.
The chances are higher your spouse has cryptocurrency if they’re super tech-savvy, have owned Bitcoin in the past, or have received crypto in exchange for goods and services before.
How do you divide Bitcoin in a divorce?
Once identified, cryptocurrencies are treated as any other marital asset in a divorce. If the Bitcoin assets were purchased or acquired during the course of the marriage, then they will be treated as marital property and be subject to asset division just as any other joint asset. Because cryptocurrency is digital, all transactions will be timestamped, so it should be easy to find out when the assets were acquired. Another thing to keep in mind is that cryptocurrency, like stocks, are volatile in value, so when dividing these assets it is best to do it as close to the settlement of your divorce as possible.
As for division of cryptocurrency, you and your spouse have a few options:
- Transfer your share of the crypto to an account in your name
- Cash out your share of the crypto
- Allow your spouse to keep the crypto in exchange for other assets of equal value
Whatever you and your spouse decide, it’s important to remember the volatility of cryptocurrency, as well as the potential risks versus reward. If you are new to virtual currency, ensure you are knowledgeable and informed before making any agreements:
- Do you understand how to use Bitcoin?
- Do you have a safe place to store your password?
- Are there tax liabilities from any fund transfer or cash out?
- Does cryptocurrency make sense for your investment portfolio?
Your family law attorney can help guide you through these decisions as you proceed with your divorce.
Cryptocurrency is still in its Wild West stage regarding asset division. One asset recovery expert tells Bankrate, “It’s a real threat. It’s not going to come up in the average divorce of Joe versus Mary where they both have regular jobs and are a middle class family. But the wealthy and uber-wealthy who have access to this are going to use it to hide their value.”
The asset division process was designed for divorcing couples to split their marital property more equitably. However, when one spouse attempts to hide assets from the other, the entire process will fail. If you believe your spouse is hiding assets like Bitcoin or other cryptocurrency, contact an experienced lawyer to investigate.
The Rockville divorce and asset division attorneys at McCabe Russell, P.A. are here to guide you through the process, easing your concerns and answering all your questions. Let us put our knowledge to work for you. Schedule a consultation with one of our attorneys by calling 443-917-3347 or reaching out to us through our contact form today. We maintain offices in Bethesda, Fulton, Columbia, and Rockville.
Emily has earned the well-deserved reputation among her colleagues for her willingness to successfully take on some of the most difficult divorce and custody cases throughout the state. Without a doubt, Emily is the trial attorney you want seated on your side of the courtroom.
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