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Divorce and Digital Currencies: What You Need to Know

Posted by Genghis X. Shakhan | Jan 15, 2025 | 0 Comments

In an era where digital currencies like Bitcoin, Ethereum, and other cryptocurrencies have become mainstream, the landscape of divorce proceedings is evolving. For individuals navigating divorce, understanding how digital currencies factor into property division is crucial. These assets are valuable, volatile, and often complex to track, making them a critical consideration in high-asset and high-conflict divorces. 

Digital currency

What Are Digital Currencies?

Digital currencies, commonly referred to as cryptocurrencies, are decentralized forms of money that exist exclusively online. They are secured by cryptography and operate on blockchain technology. Unlike traditional financial assets, cryptocurrencies are not tied to banks or governments, which adds to their complexity in legal proceedings.

Popular examples include:

  • Bitcoin (BTC): The first and most recognized cryptocurrency.
  • Ethereum (ETH): A versatile platform for decentralized applications and smart contracts.
  • Stablecoins: Cryptocurrencies pegged to stable assets like the US dollar to minimize volatility.

These assets are often held in digital wallets or exchanges, making their discovery and valuation a unique challenge in divorce cases.

Why Digital Currencies Matter in Divorce

Cryptocurrencies can hold significant financial value and may be considered marital property subject to division during divorce proceedings. Failing to account for digital currencies can result in an inequitable division of assets. Here are the key reasons digital currencies matter in divorce:

  1. High Value: Cryptocurrencies can represent a substantial portion of marital wealth.
  2. Volatility: Their value can fluctuate significantly, affecting the timing and method of division.
  3. Concealment Risks: Digital currencies are easy to transfer and hide, posing challenges for transparency and equitable distribution.
  4. Tax Implications: Cryptocurrencies are subject to specific tax rules, and improper handling during divorce can result in financial penalties.

Challenges in Dividing Digital Currencies

  1. Discovery of Assets Digital currencies are not always listed in traditional financial accounts, making them harder to uncover. Spouses may attempt to conceal cryptocurrency holdings by using:
    • Anonymous wallets
    • Offshore exchanges
    • Decentralized platforms

To address this, attorneys often use forensic accountants or subpoena financial records from exchanges to trace digital currency transactions.

  1. Valuation The value of cryptocurrencies fluctuates rapidly. Determining their worth requires:

    • A snapshot of their value on the agreed-upon date (e.g., the date of separation or filing).
    • Expert assistance to project potential future value trends.
  2. Division Methods Once identified and valued, cryptocurrencies can be divided in several ways:

    • In-Kind Transfer: Splitting the actual cryptocurrency between parties.
    • Offsetting Assets: Awarding one party the cryptocurrency and compensating the other with other marital assets.
    • Liquidation: Selling the cryptocurrency and dividing the proceeds.
  3. Tax Considerations Cryptocurrency transactions are taxable events. Dividing or liquidating digital currencies may trigger capital gains taxes, which should be factored into the divorce settlement.

Steps to Protect Yourself

  1. Disclose and Discover: Ensure all digital assets are disclosed during the divorce process. Utilize forensic accountants if necessary.
  2. Hire an Experienced Attorney: Work with legal counsel who understands the nuances of digital currencies in divorce proceedings.
  3. Document Ownership: Keep records of when and how cryptocurrencies were acquired to determine whether they are marital or separate property.
  4. Consider Timing: Work with financial experts to decide the best time to value or liquidate assets to minimize financial loss.

Case Example: Digital Currencies in Action

In one high-profile divorce, a spouse attempted to hide millions in Bitcoin acquired during the marriage. Through forensic investigation, the hidden assets were uncovered, leading to an equitable division of the marital estate. This case highlights the importance of being vigilant when digital currencies are involved.

Digital currencies are reshaping the financial landscape of divorce. Their unique characteristics make them both an opportunity and a challenge in property division. Whether you're dealing with hidden assets, volatile values, or tax implications, having the right legal team by your side is essential.

At Shakhan & Wilkerson Law, we specialize in navigating the complexities of high-asset divorces, including those involving digital currencies. Our expertise ensures that your financial future is protected. Contact us today at 404-999-9529 to schedule a consultation and take the first step toward securing what's rightfully yours.


Disclaimer: This blog is for informational purposes only and does not constitute legal advice. Always consult with a qualified attorney for guidance on your specific situation.

About the Author

Genghis X. Shakhan

Genghis hails from the Buckeye State. He attended the Ohio State University for undergrad and graduate studies where he majored in post-colonial literature and hoped to become a college professor. ​ Genghis enjoys spending time with his daughter and reading at least one book a month in his leis...

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