At Knies, Helland & McPherson, our attorneys are increasingly dealing with cases in which one or both spouses in a divorce case have cryptocurrency. This tracks with national trends on cryptocurrency, which show that most of the current investors only started investing in cryptocurrency in 2021.
What Is Cryptocurrency?
Cryptocurrency is a digital currency that is encrypted and can be invested, spent, or exchanged for money. There are approximately 3000 different cryptocurrencies in existence. Bitcoin is the most valuable and most commonly used cryptocurrency. Ethereum is another popular and high-value cryptocurrency.
People can buy cryptocurrency or receive it from others. They can also mine it themselves if they are technologically savvy.
How Do People “Hold” Cryptocurrency?
Cryptocurrency is commonly held in centralized exchanges like Coinbase. Centralized exchanges have security procedures to minimize the risk of hacking and often have fees associated with them.
Cryptocurrency can also be held in blockchain wallets or software wallets, both of which are decentralized, unlike Coinbase. This is a less secure way to “hold” cryptocurrency but can make it easier to hide and avoid fees.
Spouses can transfer funds from centralized exchanges to decentralized wallets, and vice versa. Decentralized ways to store cryptocurrency, like blockchain wallets or software wallets, are harder to track. Spouses can also “cash out” cryptocurrency for money like we are typically accustomed to.
Why Is Cryptocurrency Important In Divorce Cases?
If cryptocurrency is acquired during the marriage or increases in value during the marriage, the cryptocurrency will likely be subject to valuation and division during a divorce case. Cryptocurrency has value and can be used just like other marital assets may be used, so it is important to investigate and address cryptocurrency holdings in a divorce.
How Attorneys at Knies, Helland & McPherson Can Help
Our attorneys at Knies, Helland & McPherson are actively learning about cryptocurrency and litigating these new issues in our divorce cases.
Like with other assets in a divorce case, sometimes a spouse may not disclose the existence of cryptocurrency holdings, especially if the cryptocurrency is easy to hide (i.e. being held in a decentralized manner). There are ways to find cryptocurrency, which include thoroughly reviewing bank accounts and credit card statements, and reviewing tax returns. A forensic expert may also analyze electronic devices to uncover the acquisition and use of cryptocurrency.
If you believe your spouse may be concealing cryptocurrency in your divorce case, an attorney can assist you by serving formal discovery with questions and requests for documents to further uncover the existence of cryptocurrency. An attorney can also initiate a deposition to ask relevant questions about cryptocurrency, and can assist with tracing cryptocurrency on the blockchain.
Citation: “Cryptocurrency and Divorce Cases.” myLawCLE, January 13, 2022 by Kelly Burris, Esq.