Distribution of Cryptocurrency and Bitcoin in a Divorce

May 1, 2023
Louis Sternberg

Cryptocurrency and Divorce

Cryptocurrency or Bitcoin is a digital or virtual form of currency that utilizes cryptography for secure financial transactions and to control the creation of its new units. Unlike traditional forms of currency issued by governments, cryptocurrencies operate on decentralized networks based on “blockchain” technology, which maintains a public ledger of all transactions. The most well-known cryptocurrency is Bitcoin, but there are countless other forms of other cryptocurrencies with varying features, popularity and purposes. Transactions in cryptocurrency are typically peer-to-peer, meaning they occur directly between users without the need for intermediaries like banks. Cryptocurrencies are attractive due to benefits such as decentralization, security, and the potential for anonymity, though they also face challenges including volatility and regulatory uncertainty. Divorce litigation concerning cryptocurrency is becoming increasingly common and will likely be commonplace in the future.

Bitcoin and Crypto in a New York Divorce

What happens to crypto in a divorce? It is no secret that cryptocurrency is on the rise. Today, approximately 16 million Americans own at least one form of cryptocurrency.   If you are going through a divorce in New York, and if you or your spouse have acquired crypto assets either before or during your marriage, you may have questions as to how this will factor into your case.

Cryptocurrency can present unique challenges in divorce cases. The division of crypto assets can be complex, as they are often difficult to trace and value. New York courts consider cryptocurrency as marital property subject to equitable distribution. It is important to consult with a knowledgeable attorney who can help navigate the legal issues surrounding crypto in a divorce. Proper documentation and expert valuation may be necessary to ensure a fair division of these assets.

Cryptocurrency can be challenging to handle in divorce cases. The division of crypto assets is complex due to difficulties in tracing and valuing them. New York courts classify cryptocurrency as marital property and subject it to equitable distribution. Consulting an experienced attorney is crucial to navigate the legal aspects of crypto in divorce. Proper documentation and expert valuation may be required for a fair division of these assets.

Finding Crypto and Bitcoin in Divorce

In a New York divorce, cryptocurrency is treated like any other asset.  Most importantly, this means that owning cryptocurrency must be disclosed to the other spouse. Not disclosing cryptocurrency is as illegal as not disclosing your bank accounts. If you believe your spouse may be hiding virtual assets, some good indicators that your house is holding cryptocurrency whether your spouse has ever owned cryptocurrency, or whether he or she has ever received cryptocurrency for goods or services.

After cryptocurrency has been disclosed, there are many additional challenges.  The first is determining whether the cryptocurrency should be classified as either marital property (that will be divided at the conclusion of the case) or separate property (that will not).  If you or your spouse can prove that the cryptocurrency was acquired before the marriage, it could be considered separate property and not subject to distribution. Unfortunately, this seemingly simple piece of information can be extremely difficult to prove with untraceable crypto transactions.  

Another challenge is the difficulty of valuing cryptocurrency.  Valuing cryptocurrency can be a crucial part of the divorce process and must be done at the right time due to the asset’s volatility.  While it is the norm that assets in a divorce are valued at the time of the commencement of the divorce action, it may be beneficial to negotiate the valuation of the asset at a later date. Establishing these key pieces of information could also be a costly endeavor, as forensic experts are usually needed to decipher the blockchain to determine when the cryptocurrency was purchased and how it should be valued.

What Happens to Crypto in a Divorce – Distributing Cryptocurrency in Divorce

When all is said and done and it eventually comes time to divide the asset, the final challenge now becomes how to go about doing so.  There are many options that can be explored, including one spouse keeping the cryptocurrency and offering a different asset of equal value.  Other options include selling the digital currency and dividing the proceeds, or transferring the cryptocurrency on a virtual exchange.  There are positives and negatives to each option, and having the right attorney to review this with you in detail will be critical to obtaining the maximum value of these virtual assets. 

New York Divorce Attorney for Divorce with Cryptocurrency

Louis L. Sternberg is an experienced and respected New York attorney known for his expertise in litigating New York divorces involving cryptocurrency and bitcoin. In today’s digital age, where assets increasingly exist in the virtual realm, Louis’s specialized knowledge ensures equitable division and fair outcomes for all parties involved. With an innovative approach and a commitment to staying ahead of the legal and technological curve, Lou and his team of New York divorce lawyers offer unmatched counsel for those facing the challenges of dividing digital assets. Whether you’re dealing with bitcoin, Ethereum, or other cryptocurrencies, our expertise can guide you through the intricacies of asset valuation, division, and securing your financial future post-divorce. Trust the Law Office of Louis L. Sternberg PC to bring clarity, precision, and fairness to your divorce proceedings in the digital age.