As if legally separating and identifying assets during a divorce wasn’t already exasperating, now there is the question: how do we deal with Bitcoin?
If you or your spouse had cryptocurrency during the marriage, how will it be addressed? Is it an asset? Is it income?
You should discuss any cryptocurrency, like Bitcoin, Litecoin, Etherum, Ripple, Dogecoin, etc. that you or your spouse own with your divorce attorney. It may be determined that it is indeed a marital asset that needs to be divided and have a value placed on it. But since cryptocurrency always seems to be fluctuating, it can be complicated to figure out just how much it is worth.
For a while, it seemed the shine on the cryptocurrency fad had faded. But Bitcoin and others have been making headlines again, especially since Tesla announced it had bought $1.5 billion in Bitcoin which sent the stock price soaring.
According to CoinMarketCap, there are some 7,800 different cryptocurrencies at the time of this writing. Investors and brokers are currently saying any digital token might skyrocket overnight much like Dogecoin.
The increased interest in cryptocurrency means that more and more digital tokens like Bitcoin will be something that needs to be identified as a marital asset, evaluated, and divided amongst couples.
The Basics of Cryptocurrency
Cryptocurrency is basically an algorithm that determines how a unit of currency within a network of computers is created and regulated. A unit, called a coin or token, is a number within a database that records the transactions of that number.
This history of transactions is called a blockchain. The purpose of the blockchain is not only so cryptocurrency can be validated, but also to keep tokens secure.
Since Bitcoin and others aren’t connected to any government or third-party bank, transfers of Bitcoin are free from almost all international regulations or any subsequent fees. But this also means that Bitcoin holds none of the same legal status as money since its value is not guaranteed by a central bank or any public authority.
Cryptocurrency can be bought, sold, and traded on various platforms, but you can also earn Bitcoin by “mining.”
Mining refers to the action of a network of computers, as mentioned above, where the digital coin or token is actually created. Mining is the time-consuming process where teams of computers work to solve mathematical problems. Once the problem is solved, digital coins are created and distributed to the computer who solved the problem.
Your Spouse Might Use Bitcoin to Hide Marital Assets
Digital assets like Bitcoin have become an ideal way for many dishonest spouses to hide marital assets. Even divorce attorneys with years of experience in property division can find it difficult to track down such funds.
It is now imperative for any competent divorce attorney to have a working knowledge of cryptocurrency so they can not only find the funds but determine their value.
To trace cryptocurrency to its owner you will need the “private key.” These are passwords held by the owner of the cryptocurrency that allow them to spend or trade their e-coins.
Perhaps the best way to find these private keys is to locate the “wallet” where they are kept. Wallets are anything the owner uses to keep track of their private keys like an app or other piece of software. Some Bitcoin owners will use a third-party service called an exchange to hold their private keys.
To discover the value of your spouse’s Bitcoin, your attorney should make detailed discovery requests to get the needed information. It might also be possible, if the Bitcoin owner used an exchange, to subpoena the information from that company. But these numbers, private keys, can be easily transferred from one wallet to another making it difficult to find.
But since losing the private key would mean losing the cryptocurrency altogether, many owners have multiple wallets with their private keys. Your attorney should send your spouse a “spoliation notice” as soon as possible so they do not have the opportunity to move or alter any pertinent information.
Phones, computers, and other digital devices are usually used for cryptocurrency transactions. Since this is the case, an experienced tech should be able to extract the device’s data including the private keys. Your attorney should act fast to preserve the information and ensure your spouse’s phone or computer won’t be scrubbed.
What To Do If You or Your Spouse Has Cryptocurrency
1. Looking For Cryptocurrency
Have you asked your spouse whether they have Bitcoin or another form of cryptocurrency? Do you know if bank or credit card statements will show withdrawals and deposits from a digital currency platform? Are there emails or text messages that discuss cryptocurrency?
All of this information is vital to relay to your attorney so they can begin to collect information about the cryptocurrency.
2. Don’t Delete Anything That Might Be About the Cryptocurrency
Don’t delete any proof that the cryptocurrency exists or close any cryptocurrency accounts.
Not preserving this information or closing accounts may lead the judge to believe that you undertook such action to hide the assets.
3. Obtaining Documentation of Cryptocurrency
First, try to find out if the cryptocurrency owner kept their private keys in an online wallet or on a physical device like a hard drive. Ask your attorney what steps need to be taken to preserve the information.
The Bitcoin owner can download their transaction history from their wallet or other storage device. Usually downloaded as an Excel spreadsheet, the data should contain information regarding the amount, time, date, conversion rate, balance, and transaction ID.
Most of these transactions are confirmed by emailing a receipt to the owner and confirming the details. Sometimes other information like where a user deposited funds after a sale or where funds were withdrawn from, are also contained in the email. This info can be extremely helpful in tracking other assets as well.
Because virtual currency can have real value, it’s an important part of family law matters. If you find that Bitcoin or another form of cryptocurrency will be a part of your divorce, make sure you talk to your lawyer so they can help you receive an equitable settlement.
Make Sure Your Divorce Settlement Is Fair and Equitable
Are you struggling with the possibility of a divorce? Contact our team of attorneys for a consultation.
JulianJohnson, P.C. offers personal attention to people in need of family law attorneys in Flower Mound, TX and the surrounding cities are all part of the area we serve.
If you need help with a family law matter, Jared Julian has been helping people for more than a decade and is also a licensed Mediator. This makes him a professional in settling family disputes. As an experienced family mediator, he listens to both sides and makes an informed decision that is in the best interest of all parties. When faced with a heated situation such as the dissolution of a marriage, call a lawyer with compassion, knowledge and experience of the legal system
