How to Find and Value Cryptocurrency in a Divorce
Many Americans own cryptocurrency today. The popularity of cryptocurrency is driven in part by the fact that these digital currencies use secure encryption techniques and are not governed under any central authority. As a digital asset, they can be easy to hide and difficult to value—and a person planning to divorce may use cryptocurrency to conceal assets from his or her spouse during financial discovery. A lawyer can help account for all digital assets to ensure a divorce proceeds fairly for both parties.
Identifying Hidden Cryptocurrency in Marital Property
In the U.S., cryptocurrency is treated as an intangible property that must be declared in a divorce. If a spouse fails to declare a cryptocurrency investment, it may still be traceable. For example, a spouse may be aware from previous conversations that an investment exists, or they may suspect that it does based on changes in the other spouse’s lifestyle. In that case, a family law attorney may file a subpoena to gain access to the other party’s computer or electronic devices. There are many ways to track down cryptocurrency investments:
- Forensic experts can be employed to check electronic devices for login credentials or to search for digital currency ticker symbols.
- Experts can check tax returns for records of income from cryptocurrencies, look for transfer activity on bank statements, or refer to confirmation emails from exchanges.
- An attorney may refer to past loan applications to find mentions of a cryptocurrency.
Once all assets are located, it is time to make sure they are properly valued.
How Is Cryptocurrency Valued?
In disclosing assets, divorcing spouses may need to calculate the fair market value of cryptocurrency. This can be tricky because of the volatility of bitcoin and other cryptocurrency. The divorce process could take a few months, and cryptocurrency can appreciate or depreciate substantially during that time. To solve that problem, divorcing spouses can agree that the value of a cryptocurrency will be its value at the time of distribution.
Demand and Other Factors that Influence Valuation
The price of cryptocurrency is determined by demand. The value of digital currencies rises with heavy demand from buyers. On the other hand, with high token supply and little demand, the value will drop. Other factors that affect value include the level of utility, the difficulty of the mining process, and the number of people who have invested in the cryptocurrency.
How Is Cryptocurrency Transferred in a Divorce?
Cryptocurrency can be transferred from one spouse to another during the equitable distribution process in several different ways. A spouse can:
- Transfer cryptocurrency from his or her wallet to the other spouse’s wallet;
- Transfer cryptocurrency to a custodian, who will likely liquidate the cryptocurrency for local currency and transfer it to the recipient; or
- Liquidate the appropriate amount of the cryptocurrency and transfer the liquidated value to the other spouse.
Find an Experienced Lawyer for Your Complex Divorce
Dividing assets in the equitable distribution process of a divorce can be both complex and contentious. Investments are often more difficult to value and divide than real estate, vehicles, and bank accounts, and particularly when cryptocurrency is involved. Our experienced Montgomery and Chester County divorce attorney has the skills and resources to advise and assist you with division of assets, as well as all other aspects of divorce.
At the Law Offices of Sheryl R. Rentz, P.C., we have been managing complex and high-asset divorce cases for a quarter of a century. We can guide you through every step of the process, always keeping your priorities in mind. Call us at (610) 645-0100 to schedule a consultation.