The digital economy is causing a seismic shift in the world of divorce, with experts warning that the increasing use of cryptocurrency is leading to enhanced financial complexities in many high-stakes breakups.
As cryptocurrencies such as Bitcoin continue to grow in mainstream acceptance, the issue of virtual assets often arises when couples separate. Bitcoin, in particular, is becoming a more commonplace topic in divorce proceedings, with some describing it as a “honeypot” for parties wanting to hide assets from their significant others.
According to CNBC, divorce attorneys are warning that cryptocurrencies are making separation increasingly complicated, as digital assets aren’t as easy to monitor and track as traditional financial holdings.
“Crypto is a hot button topic in many divorce cases,” said Emily Rubenstein, an attorney at New York-based law firm Kasowitz Benson Torres, in a statement to CNBC.
Rubenstein added the lack of regulatory guidelines for cryptocurrencies, in addition to the anonymity of digital assets, often make it challenging for lawyers to track digital holdings, making it hard to put a value on what a person may own.
“When people talk about wanting to hide assets from their spouse, they traditionally talked about cash, maybe stocks, and bonds,” Rubenstein said. “Now, the new pot of gold to hide assets is cryptocurrencies, largely because they’re hard to value and hard to trace.”
Investors in cryptocurrencies often face issues when it comes to determining the value of their investments, as cryptocurrencies are known to be volatile and frequently change in value. CNBC reports that cryptocurrency assets can complicate divorce proceedings, particularly if the parties involved don’t disclose all of their holdings.
And with cryptocurrencies being unregulated, it makes it difficult to assess their worth. In some instances, lawyers for both parties may be unable to agree upon the value of a digital asset, leading to a protracted dispute. That’s why the disclosure of all assets, including cryptocurrencies, is critical when dissolving a marriage.
“Crypto is just another layer of complexity to the divorce proceeding,” said Rubenstein. “It’s another ‘check the box’ item on the checklist of things that lawyers and their clients need to be aware of.”
Aside from complications with asset valuation, cryptocurrencies pose challenges when it comes to child support and alimony payments. Traditional banking systems make it easier to track payment history and ensure that payments are being made in a timely manner. However, cryptocurrencies, such as Bitcoin, can be challenging to track because it’s a decentralized currency that isn’t routed through financial institutions.
Tammy Law, a family lawyer based in Australia, warned that digital currency makes it even more challenging to ensure that a spouse is paying the correct amount of child support or alimony.
“A significant issue that arises with bitcoin and other cryptocurrencies is how to value them and comply with child support and alimony orders,” Law said in a statement. “Parties have to disclose all their assets, including digital currency, and their values at the time when orders are made.”
Law added that courts may not recognize a party’s cryptocurrency holdings if the assets can’t be verified, making disclosure even more critical.
In cases where cryptocurrencies are involved, individuals need to be transparent about their holdings from the beginning. They need to ensure that all assets are accounted for and accurately appraised so that the process of separation is smoother and less contentious. For those who want to hold on to their digital assets, it may be possible to offset cryptocurrency assets with other assets or pay the spouse an added portion of an agreed-upon sum.
In conclusion, the rise of cryptocurrencies has made divorce proceedings more complicated than ever before, with lawyers and parties needing to take extra care to ensure that all assets, including digital assets, are appropriately disclosed and valued. Ensuring that full transparency is maintained can help to prevent lengthier and more costly disputes and preserve the assets of both parties. Importantly, it also ensures that courts can deliver a fair and just settlement in the best interests of both parties and their families.
Cryptocurrency has become a complication in an increasing number of divorces, according to a report from CNBC. Divorce attorneys are now reporting an increasing trend of people hiding cryptocurrency from their partner. As the crypto market has expanded, crypto now plays a role in roughly 20% to 50% of divorces handled by attorneys in Florida, Texas, New York, and California. Financial infidelity involving secret crypto holdings has made the jobs of financial advisors and divorce attorneys increasingly complex in recent years.
In certain complicated cases, some investigators told CNBC, one spouse tries to hide money by transferring their cryptocurrency across several different coins on several different blockchains to make it harder to track. This, according to Kelly Burris, a Texas divorce attorney, can be particularly challenging as “the thing with cryptocurrency is it’s not regulated by any kind of centralised bank, so usually you can’t subpoena somebody and get documents and information related to somebody’s cryptocurrency holdings.”
Even when a couple is transparent about their investments, the exceptionally volatile nature of cryptocurrencies can complicate a divorce because of how quickly its value can change. This is exactly what happened to one woman who happened to learn that during her divorce, her then-husband held an undisclosed crypto wallet with 12 bitcoins worth about $500,000 at that time. This was a shock as her then-husband earned at least $3 million per year and had very few assets that could be split in the divorce. After months of assistance from a forensic accountant, she discovered an undisclosed crypto wallet held by her then-husband.
The lack of regulation in the cryptocurrency sector makes it very difficult to demand transparency in divorce cases. The anonymity provided by the blockchain technology and the decentralisation of the crypto market make it challenging to track down hidden assets. This is compounded by the fact that many people see cryptocurrencies as a lucrative investment opportunity, and this attracts them to the market, often without notifying their partner.
In conclusion, as the crypto market expands and gains ground in the mainstream, divorce attorneys and financial advisors face new challenges. Cryptocurrencies play a growing role in divorces, and the lack of regulation in the sector makes it difficult to track down hidden assets. If this trend continues, it is possible that the job of divorce attorneys and financial advisors will become increasingly difficult. It is, therefore, important for couples to be transparent with each other about their investments and assets, particularly those held in cryptocurrencies.
