Nov 13, 2018

The Implications of Cryptocurrency in Divorce

Nov 13, 2018 - Resources by |

Cryptocurrency Divorce Adds a Modern Complication

As cryptocurrencies, headlined by Bitcoin, moved from a niche financial product to one in the mainstream, they have also started to add new layers of complexity and complication to divorce proceedings. As a new and different type of financial asset, there are several important implications with cryptocurrency in divorce.

One of the first issues at hand is the valuation of a cryptocurrency. As has been widely reported, the speculative nature of the crypto market has made for wild swings in value. Even when not in the throes of chaotic thousand-point ups and downs, the valuations still move rapidly. Therefore, the parties may have difficulty reaching a set valuation of the cryptocurrency held as an asset. A date needs to be chosen to create that valuation, or ongoing valuations need to occur at different dates throughout the process.

More sensibly perhaps would be an alternative take—splitting up the total amount of Bitcoin in terms of quantity between the two parties, as opposed to the value that Bitcoin represents. Of course, one party or the other may personally believe more in the future value of that asset as opposed to traditional assets, and that adds another element to the negotiation of a divorce and who gets what.

Beyond the difficulties of setting a valuation is perhaps an even larger complication, the prospect that cryptocurrency assets could be hidden by one party from the other. Cryptocurrency markets were designed for the anonymity of the holdings and security of the transactions being placed.

While the financial discovery process of a divorce would include this, and experienced attorneys will now be careful to add in the correct language to ensure it’s not overlooked, there’s still the potential for deceit though. With careful maneuverings, there could be little to no trace of a cryptocurrency asset. What kinds of chances might one party be willing to take in order to hide a large asset in the form of cryptocurrency holdings?

Technology is continuing to rapidly change our way of lives, and our knowledge of and involvement with cryptocurrencies is still only in its nascent stages. Expect to see more news in the years to come in terms of how courts and family law on the whole handles cryptocurrency in divorce.