Divorce always raises thorny questions of how to divide marital property. In most cases, the remedy is pretty straightforward, requiring a surgical split between the two parties' assets — although you can't do that with the family dog or aquarium. But if you thought deciding who gets the dog was complicated, here comes cryptocurrency.
With the crypto wealth accumulation phase still new within many households, and the recent sharp decline in digital assets including bitcoin and ether dinging the confidence of investors who had just seen record highs, the path forward is murky. But for many married Americans, the current price of crypto doesn't even register as an issue. That's because the assets are easily squirreled away from an unsuspecting spouse.
"In divorce cases, crypto is creating the same headaches we've long seen with offshore accounts, except now the assets can be moved instantly and invisibly," said Mark Grabowski, professor of cyber law and digital ethics at Adelphi University and author of several books about cryptocurrencies. He added that the problem is that ownership isn't determined by a name on an account — it's determined by who holds the private keys.
"If one spouse controls the wallet, they effectively control the assets," Grabowski said.
Lawyers now have to subpoena exchanges, trace transactions on the blockchain, and determine whether coins were purchased before or during the marriage.
"Without that transparency and given the lack of reporting standards, it's easy for one spouse to hide or underreport holdings. Courts are still catching up," Grabowski said.
In theory, though, a crypto divorce should work like any other. Renee Bauer, a divorce attorney who has dealt with crypto splits, says the biggest question couples fight about is simple on the surface: who gets the wallet?
"That question opens the door to a mess of complications that traditional property division never had to deal with," Bauer said.
The first challenge is figuring out what actually exists.
"A retirement account comes with statements. A house has an address. Crypto may be sitting in an online exchange or in a hardware wallet that one spouse conveniently forgot to mention," Bauer said.
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