When spouses separate and make the decision to get divorced, it is common to encounter disagreements about division of liquid assets such as bank accounts and other investments. The rising popularity and availability of cryptocurrencies can further complicate this financial dispute, particularly if one party attempts to hide assets through Bitcoin and other virtual currencies.
If you would like to know more about divorce cases and cryptocurrency, continue reading.
What Is Cryptocurrency?
Bitcoin and other cryptocurrencies are virtual currency that exist only online and are traded via an encrypted ledger. It first emerged approximately 10 years ago and is much more difficult to trace than other financial transactions.
How is Cryptocurrency Handled in Divorce?
When it comes to equitable division of assets, cryptocurrencies present several challenges.
Divorce Discovery and Cryptocurrency
First, individuals going through a divorce may disavow possession and/or knowledge of cryptocurrency. Given that cryptocurrency is not necessarily titled in a person’s name or held with a bank, it can be more difficult to identify and locate. The lack of legal and regulatory infrastructure for cryptocurrency and knowledge about Blockchain technology could also present issues in discovering the cryptocurrency.
Concealing Assets Using Cryptocurrency? Not So Fast.
Second, some spouses attempt to conceal assets by converting traditional assets to cryptocurrency. A spouse could use funds from a joint bank account to purchase cryptocurrency without the other spouse’s knowledge. It may be difficult for the other spouse to identify exactly what funds were used for those purchases.
Valuation of Cryptocurrency in a Divorce
Third, even if the identity of the cryptocurrency is known to all parties, valuation can present issues. Cryptocurrencies are still volatile as compared to more traditional assets. Values can fluctuate wildly week to week and even day to day. Dispute may arise as to what is the appropriate date to value the cryptocurrency.
Is Cryptocurrency a New Way of Hiding Assets?
Divorce cases involving cryptocurrency present unique concerns, as there are not currently any specific laws regarding cryptocurrency protection during a divorce process. What’s more, attempting to hide assets via cryptocurrency is likely to become more common in the future.
Nevertheless, forensic accountants caution that concealing wealth with cryptocurrency is not foolproof. In fact, depending on attorney and accountant expertise, crypto-transactions can be traced through crypto-trading platforms and uncovered as an asset during discovery. Many attorneys are revising their forms to include requests for cryptocurrency. If an individual suspects their spouse has, or may have, cryptocurrency that person should make their attorney aware of such early on in the representation.
Learn More About Divorce Cases and Cryptocurrency
For additional information about divorce cases and cryptocurrency, please call our office today and schedule a consultation with one of CGG’s highly skilled and experienced family law attorneys.