Tracing Digital Assets in Divorce (Cryptocurrency)

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Everyone is asking about cryptocurrency and NFTs (Non-Fungible Tokens) in divorce. More and more people are investing in and using cryptocurrency, and it could be an important asset that needs to be accounted for during the divorce. In some cases, one spouse has made or lost a lot of money trading crypto, and that has implications too.

So what do you do if you haven’t a clue about this crypto stuff?

First, you make sure you’re working with a forensic accountant or other financial expert who knows what they are talking about. Cryptocurrency can be hard to track down and an added problem is the volatility (crypto can gain or lose a ton of value throughout a day).

Second, you can learn the basics of crypto and NFTs so that you at least know what you’re talking about. Cryptocurrency is quite simply a digital currency in which transactions are verified and records are maintained by a decentralized system. In other words, no one person or entity (like a government) controls cryptocurrency. There are all sorts of different flavors of cryptocurrency, but some of the most recognizable names include bitcoin, ethereum, litecoin, and dogecoin.

What is “NFT”? It’s a non-fungible token. Non-fungible means it’s unique. Unlike a bitcoin which is not unique (and therefore is fungible) and can be traded for another bitcoin with equal value, a NFT is unique. An NFT could be anything digital such as a drawing or music.

The two big issues surrounding cryptocurrency and other digital assets in divorce are:

  1. Finding them
  2. Valuing them

Digital assets can be difficult to find. One reason why people may use cryptocurrency is to maintain anonymity in transactions. That makes it difficult to track down the crypto if you don’t have the “wallet” information.

The value of digital assets can be difficult to determine because the market fluctuates so wildly and quickly. That makes it hard to do an equitable division of assets. What number do you put on the digital assets? Maybe you can divide the cryptocurrency equally (i.e. split the number of bitcoins in half) and then it won’t matter. Or maybe it can be sold outright so the proceeds can be split.

Cryptocurrency and NFTs are going to play bigger and bigger roles in divorces as these assets become more mainstream and more valuable. Be careful not to overlook them in your divorce case.

 

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