The Growing Issue of Cryptocurrency During a Divorce

The Growing Issue of Cryptocurrency During a Divorce

While cryptocurrency has brought an entirely new group of investors to the world of finance and provided new investment opportunities, it has also made a number of issues more complicated. In particular, divorce can be especially challenging when one party invests a substantial amount of money in cryptocurrency. Cryptocurrency is naturally harder to track than more conventional types of currency, and if one partner doesn’t even know that they should be looking for cryptocurrency, they could get a smaller share of the marital assets than they deserve.

That’s why it’s important to work with a Charleston divorce attorney with extensive experience in cryptocurrency and other trends that may affect the outcome of your split. Call Pence Law Firm at 304-345-7250 to set up a consultation with our team at your earliest convenience.

Volatile Value

One of the most difficult aspects of cryptocurrency is its constantly fluctuating value. While stocks are also prone to dramatic drops and increases, these types of drastic changes are far more commonplace across the realm of cryptocurrency. This can make it extremely difficult to get a fair valuation on cryptocurrency, as its value during negotiations could be significantly higher or lower than its value when the divorce is finalized. Any massive change in value could require an entirely new division of assets in order to preserve the split of assets previously agreed upon.

Identification and Tracing

In many cases, even identifying and finding cryptocurrency can be a challenge. This is where it’s often helpful to turn to a forensic accountant with experience in cryptocurrency and digital assets. Those who spend a substantial amount of money and time on their cryptocurrency trades may have multiple wallets in which they keep their crypto, which can make it easy to “disclose” some assets while actually having the majority of them stashed away. 

This is especially risky when one partner is heavily into cryptocurrency and the other knows almost nothing about it. Furthermore, it is relatively easy to trade cryptocurrency multiple times in quick succession, which makes it far harder for outside parties to trace the transactions and figure out where the money ultimately ended up.

Disclosure and Hidden Cryptocurrency

The novelty of cryptocurrency means that the divorce courts haven’t quite caught up with it. Many individuals are relying on their spouses to do the right thing and disclose their assets, including those they would otherwise not know about—and that is not a risk you want to take when your financial future is on the line. 

If you don’t know that your spouse dabbles in cryptocurrency, there could be tens of thousands of dollars of assets that you don’t even know about. The good news is that those who are into cryptocurrency are often fairly talkative about it, so unless they’ve been trying to hide these assets from you from the very beginning, there’s a good chance you’ll know about their investments.

Division of Cryptocurrency

Fairly dividing cryptocurrency can be a point of contention during a divorce. First, there’s the issue of fair valuation, which we discussed earlier. Second, once you agree upon a split, you have to decide what to do with the cryptocurrency. There’s a very real possibility that the spouse who was previously uninterested in cryptocurrency is still uninterested, and they won’t want to go through the steps of making a wallet and getting set up on a trading platform. However, simply exchanging the cryptocurrency for cash can trigger additional taxes for the party who does the trading, which further complicates the division of assets. 

Offsetting the value of the cryptocurrency with another asset is a common solution. Not only does it allow the crypto-interested partner to keep their cryptocurrency and let it keep growing, but the party without any interest in cryptocurrency can get their share without having to learn an entirely new vocabulary.

Choose Pence Law Firm for Your Divorce

Wondering about how cryptocurrency will affect your divorce and the division of your marital assets? The team at Pence Law Firm can help you explore your options and come up with a plan. Reach out online or call us at 304-345-7250 to set up a consultation with our team of experienced divorce lawyers.