By Paul A. DeJesse Jr.
Cryptocurrency is a new class of asset that is becoming increasingly popular and gaining adoption around the world. There are literally thousands of cryptocurrencies on the market today and a general understanding of this digital world is essential in preserving your property rights in a divorce. For many, understanding cryptocurrency and how it works can be confusing. Essentially, cryptocurrency is a digital asset that takes the form of tokens or coins which remains entirely intangible. The “crypto” in cryptocurrencies refers to the use of cryptography which is the programming code that allows tokens or coins to be anonymously transacted or stored. These transactions are maintained on a distributed ledger of ordered records called a Blockchain. A Blockchain is similar to a database, except the transactions on a blockchain cannot be changed.
It is important to understand that the digital assets potentially held by your spouse are classified by the courts as property and may have significant value, subject to Equitable Distribution. When a spouse owns any digital assets and deliberately fails to disclose, it is critical that you and your attorney have an understanding about the methods in which your spouse’s digital assets may be stored. This understanding is especially important during the discovery phase of your case.
Digital assets may be stored on Exchange Wallets (online digital trading marketplace connecting buyers and sellers), Hardware Wallets (including storage of recovery phrases), Paper Wallets or Air Gap Computer (electronic device not connected to the internet used in tandem with USB drive to transact). Due diligence is required and being unfamiliar with these methods of storage may adversely affect your equitable distribution case. For example, at the time of this blog one (1) Bitcoin is valued at approximately $59,000!
A home inspection, search of safes and safe deposit boxes at banks need to be done if you suspect your spouse may be hiding digital assets. You should also review bank and credit card account statements for notable transactions, including wire transfers and cash withdrawals. It is important to treat this like any other financial account and do your due diligence so that you don’t end up with an inequitable property distribution.
If you or someone you know is in need of legal counseling, contact one of Hatcher Law Group’s experienced family law attorneys today.