Cryptocurrency & Divorce

Stack of gold crypto coins with Bitcoin on top and slightly off center

In recent years, cryptocurrency has become a popular means of investment and transaction online. However, as more couples invest in cryptocurrency, it becomes important to discuss how this asset might be divided in divorce.

Divorces involving crypto can be complicated, particularly when it comes to asset division. In this blog post, we'll explore some of the main concerns surrounding crypto and divorce and offer some advice on how you can protect yourself and your assets.

What is Cryptocurrency?

Cryptocurrency is a digital or virtual currency that uses cryptography to secure financial transactions and verify asset transfers. It's a decentralized system, meaning no government or financial institution regulates it. Unlike traditional currency, cryptocurrency has no physical form, and it exists only in a digital format. The most popular cryptocurrencies include Bitcoin, Ethereum, and Litecoin, among others.

Can a Spouse Take Cryptocurrency During a Divorce?

The short answer is yes. Crypto is considered an asset in the eyes of the law and therefore subject to division during divorce proceedings.

Alabama is not a community property state, meaning that marital property is not automatically divided 50/50 between spouses in a divorce case. Instead, Alabama follows the equitable distribution rule, which requires that all marital property be divided fairly and equitably. This means that the court will consider various factors such as each spouse's contribution to the marriage when determining how to divide the property.

Non-marital property, or assets acquired before marriage, are generally not subject to division during divorce proceedings. Thus, if you acquired the cryptocurrency during your marriage, it is a marital asset and is subject to division. However, determining the value of crypto can be challenging, particularly if you have a diverse portfolio.

Unlike traditional assets like cars and houses, crypto doesn't have a set value and can fluctuate wildly in a short period of time. It's crucial to work with an experienced divorce attorney who understands crypto and can help you navigate the valuation process; your attorney can connect you with a forensic accountant and other experts who can help with valuation and uncovering assets.

Crypto Can Be Used to Hide Assets

While it's possible for a spouse to take cryptocurrency during a divorce, it's equally possible for one spouse to use crypto to hide assets. Crypto is being dubbed the new 'Cayman Islands bank account' for those looking to conceal assets. Because crypto transactions are anonymous and decentralized, it can be easy for someone to transfer funds to an unknown party and conceal that money from their spouse.

Fortunately, there are steps you can take to protect yourself from this kind of deception. Working with a forensic accountant or a financial investigative professional can help you uncover any hidden assets and ensure that you're receiving an equitable settlement.

What to Do If Cryptocurrency May Be Divided in Divorce

If you're currently investing in crypto and are concerned about the possibility of divorce down the line, there are a few steps you can take to protect your assets. First, make sure to keep detailed records of all your transactions, including purchase prices, sale prices, and any fees associated with those transactions.

This information will be important during the asset valuation process. It's also critical to work with a reputable exchange and that you store your crypto assets in a secure wallet to mitigate the risk of hacking or theft.

You should also take time to investigate whether your spouse has cryptocurrency. As we mentioned, crypto can be hard to track as the system is decentralized and transactions can be hard to track. If you know in advance that your spouse has crypto, you can take steps to obtain their account information and other relevant details.

Be sure that your attorney is informed of your possession of or your spouse’s possession of cryptocurrencies. They can better advise you and devise strategies for your case.

If you're facing a divorce involving crypto, Shaw Family Law can help you protect and/or uncover assets. Discuss your case with our attorney today. Call (205) 259-7650 to schedule an initial consultation.