Your spouse invested in Bitcoin years ago when it was worth pennies, and now those holdings represent substantial wealth. Or maybe you discovered wallet addresses you didn’t know existed while gathering financial documents for your divorce. Digital assets like cryptocurrency, NFTs, and tokens don’t show up on traditional bank statements, making them easy to hide and difficult to value.
Our friends at Kantrowitz, Goldhamer & Graifman, P.C. discuss how digital assets require specialized knowledge to track and value properly during financial transitions. A forward-thinking divorce lawyer who understands blockchain technology and cryptocurrency mechanics can help you identify these assets and include them in your property division.
Why Crypto Assets Are Different
Traditional assets leave clear paper trails. Banks send statements. Brokerage firms report holdings. Real estate has deeds recorded with county offices. Cryptocurrency operates differently. Your spouse can hold millions in Bitcoin using nothing more than a string of characters called a private key stored in their head or written on a piece of paper.
The decentralized nature of cryptocurrency means no bank or institution controls the assets or maintains records you can subpoena. While blockchain transactions are technically public and transparent, connecting a wallet address to a specific person requires investigative work. Your spouse’s name doesn’t appear on the blockchain the way it appears on a bank account.
Value volatility creates additional problems for divorce settlements. Bitcoin might be worth $60,000 per coin when you file for divorce and $45,000 when your settlement finalizes six months later. This price swing affects the total marital estate significantly if your spouse holds substantial cryptocurrency. Deciding when to value digital assets and whether to account for future volatility becomes a negotiation point.
Common Types Of Digital Assets In Divorce
Bitcoin and Ethereum represent the most well-known cryptocurrencies, but thousands of alternative coins exist. Your spouse might hold positions in Solana, Cardano, Ripple, or any number of smaller tokens. Each cryptocurrency has its own wallet system, exchange requirements, and valuation considerations.
NFTs, or non-fungible tokens, add another layer of difficulty. These digital collectibles can be worth anywhere from nothing to millions depending on market interest. Determining the fair market value of an NFT your spouse purchased requires understanding the specific market for that type of digital art or collectible.
DeFi, or decentralized finance, platforms allow people to earn interest on cryptocurrency holdings, take out loans using crypto as collateral, or participate in liquidity pools. Your spouse might have assets locked in staking arrangements or lending protocols that generate passive income. These positions don’t appear as simple wallet balances and require technical knowledge to discover and value.
Gaming tokens and virtual world assets represent an emerging category. Your spouse might own valuable items in blockchain-based games or hold property in virtual worlds like Decentraland. While these might seem frivolous, some digital assets in gaming ecosystems sell for substantial amounts.
Discovering Hidden Cryptocurrency Holdings
Finding cryptocurrency your spouse hasn’t disclosed voluntarily requires detective work. Start by reviewing past tax returns for any cryptocurrency transactions. The IRS requires reporting of cryptocurrency sales and exchanges, so Schedule D or Form 8949 might show digital asset activity.
Signs your spouse may hold cryptocurrency include:
- Email confirmations from cryptocurrency exchanges like Coinbase, Kraken, or Binance
- Two-factor authentication apps on their phone linked to crypto services
- Hardware wallets like Ledger or Trezor devices
- References to wallet addresses in emails or text messages
- Unexplained transfers from bank accounts to cryptocurrency platforms
- Social media posts or messages discussing crypto investments
Check credit card and bank statements for charges to cryptocurrency exchanges. Even small purchases establish that your spouse uses these platforms. Once you identify which exchanges they use, your attorney can subpoena transaction records directly from those companies.
Computer and phone forensics can reveal cryptocurrency wallet software, exchange apps, or saved wallet addresses. If your spouse used a shared computer for crypto transactions, deleted browser history might still be recoverable. Screenshots or photos saved on devices could show wallet balances or transaction histories.
Blockchain analysis firms specialize in tracing cryptocurrency transactions. These companies can follow digital assets through multiple wallets and exchanges to see where money went. If your spouse transferred cryptocurrency to different addresses trying to hide it, blockchain analysis can expose these movements.
Valuing Cryptocurrency For Property Division
Courts need a specific date for valuing marital assets. Some states use the filing date, others use the separation date, and some use the date of the final hearing. When cryptocurrency values swing wildly, which date you use for valuation significantly impacts the settlement.
You might negotiate a different valuation date specifically for cryptocurrency holdings to account for volatility. Some couples agree to use an average value over a specified period rather than a single snapshot. Others split the actual cryptocurrency itself rather than using cash equivalents, letting each spouse manage their own allocation and absorb future gains or losses.
Illiquid cryptocurrency positions present valuation challenges. If your spouse holds tokens that rarely trade or NFTs without clear market comparables, determining fair value requires appraisal by someone familiar with digital asset markets. Traditional appraisers often lack the specialized knowledge needed for these assessments.
Staking rewards, mining income, or DeFi yields earned during marriage count as marital property in most states. Calculating the value of these earnings and determining whether they constitute separate property or marital assets requires understanding when and how the income was generated.
Dividing Digital Assets Practically
Actually transferring cryptocurrency requires technical competence. Your spouse needs to send digital assets from their wallet to yours using your wallet address. One wrong character in that address string means the cryptocurrency disappears permanently into an unrecoverable void. The stakes are high, and mistakes cost money.
Consider using a cryptocurrency exchange to facilitate transfers. Both spouses can create accounts on the same exchange, and transfers between users on a single platform are typically simpler and less prone to error than wallet-to-wallet transfers. Exchanges also provide transaction records for documentation.
Some couples sell cryptocurrency holdings and divide the cash proceeds instead of transferring the actual digital assets. This approach eliminates technical transfer risks and provides clean documentation of the division. However, selling triggers tax consequences that need consideration when structuring your settlement.
Tax implications affect how you divide cryptocurrency. Capital gains taxes apply when cryptocurrency is sold for more than its purchase price. If your spouse bought Bitcoin at $10,000 and it’s now worth $60,000, selling triggers taxes on that $50,000 gain. Deciding who bears these tax obligations becomes part of your negotiation.
Preventing Post-Divorce Manipulation
Include specific language in your divorce decree about cryptocurrency holdings. Generic property division language might not adequately protect you if your spouse tries to claim they lost access to wallets or that cryptocurrency values dropped after the divorce.
Require your spouse to provide wallet addresses and exchange account information as part of your settlement. Specify that they must transfer digital assets within a defined timeframe with proof of completed transfers. Build in penalties for failure to transfer or attempts to hide additional cryptocurrency.
Consider requesting that your spouse maintain cryptocurrency holdings in known wallets until transfers occur. This prevents them from moving assets to new addresses you can’t track. Your decree should prohibit any transfers or sales except as required by the settlement until property division completes.
Document everything related to cryptocurrency division. Take screenshots of wallet balances, save transaction confirmations, and maintain records of all transfers. If disputes arise later about whether proper division occurred, these records prove what happened.
Working With Professionals Who Understand Digital Assets
Traditional financial advisors and accountants often lack cryptocurrency expertise. Finding professionals familiar with blockchain technology, digital asset valuation, and cryptocurrency taxation helps you avoid costly mistakes during property division.
Forensic accountants with cryptocurrency experience can track digital assets more effectively than generalists. They understand how to use blockchain explorers, identify different types of wallets, and trace transactions across multiple platforms.
Tax professionals familiar with cryptocurrency reporting requirements help structure your settlement to minimize tax consequences. Digital asset sales, exchanges, and transfers all trigger different tax treatments that affect the net value you receive from property division.
Protecting Your Digital Asset Rights
Cryptocurrency and other digital assets represent real value that deserves protection during divorce. The technical nature of these holdings shouldn’t prevent you from receiving your fair share of marital property. With proper investigation, accurate valuation, and careful division procedures, you can address digital assets in your divorce settlement effectively.
We work with technology professionals and forensic accountants who understand cryptocurrency and digital assets. If your divorce involves Bitcoin, NFTs, or other blockchain-based holdings, contact us to discuss investigation strategies and division approaches that protect your interests in this evolving asset class.