Cryptocurrency, or crypto, has grown in popularity in recent years. People invest in it and use it to purchase goods and services. Existing in the digital sphere, crypto is largely unregulated and does not adhere to the same standards as fiat currency. Because of its nature, it’s easy for divorcing couples to overlook. Still, cryptocurrency is considered an asset and subject to the same property division laws as any other item. Thus, if you or your spouse hold cryptocurrency in your digital wallets, you must share this as part of the financial disclosure requirements.
The rules and laws concerning assets in a divorce can be confusing. At Claery & Hammond, LLP, our Los Angeles team untangle the complexities of their cases and seek just resolutions. To speak with us, please call (310) 817-6904 or submit an online contact form today.
What Is Cryptocurrency?
Cryptocurrency is currency that solely exists virtually. It is not a tangible object like fiat money. Instead, those who own crypto store it in a digital wallet.
Unlike physical currency, which is regulated by a government or financial agency, cryptocurrency does not have a centralized regulatory authority. It is based on a peer-to-peer system.
Generally, cryptocurrency transactions use blockchain technology. When a person makes transactions with digital money, the details get stored in a series of blocks.
Because of the way crypto works, owners can mostly stay anonymous. The anonymity makes it easy to overlook or hide cryptocurrencies during divorce proceedings.
What Are the Asset Disclosure Requirements in a Divorce?
One of the earlier stages of a divorce is an exchange of financial information between you and your spouse.
Both of you must complete several forms detailing the following:
- Assets you own,
- Debts you owe,
- Money you earn, and
- Money you spend.
The financial disclosure must be done within 60 days of filing the petition (if you’re the petitioner) for divorce or the response (if you’re the respondent).
Disclosing financial information with your spouse facilitates the fair division of property. In California, if spouses can’t agree on their own on how to split their assets and debts, the court will decide for them. The decision is based on the state’s community property laws. Under this doctrine, anything the spouses acquired during the marriage (called community property) is split equally between the couple. Each spouse gets to keep assets and debts they had before the marriage (called separate property).
Cryptocurrency is considered an asset. It is not exempt from the disclosure requirement. Thus, if you or your spouse hold any – whether it may be considered community or separate property – you must share this information with each other.
What Happens If You Fail to Report Cryptocurrency?
As mentioned earlier, crypto can be easy to overlook because it’s not a tangible asset in the physical world. It only exists digitally. It’s also easy to hide because of its anonymity and lack of a central regulator.
When you and your spouse make your financial disclosures, it’s important to be truthful about all separate and community property you own even if it is a virtual asset. If you make an honest mistake and forget to include crypto in your exchanges with your spouse, you could report the asset as soon as you recognize the error.
Now, suppose your spouse knowingly attempts to hide their cryptocurrency. That can lead to serious consequences. Your spouse may be unfairly advantaged when it comes to property division. Cryptocurrency can be worth a significant amount of money. If your spouse keeps all the crypto they acquired while you were married, they could walk away with more assets than you.
If it’s found that your spouse willfully hid assets, they could lose that property. Additionally, the court could order them to pay your legal fees and other costs and expenses you incurred.
Working with a Lawyer
Ensuring fair asset division in a divorce requires accurate disclosures of all property, physical or virtual. Cryptocurrency is a unique type of asset and can be difficult to track down if you suspect that your spouse owns some but did not report it. A family law attorney can facilitate accurate disclosures and work with experts, if necessary, to identify and value digital currency your spouse may be holding.
At Claery & Hammond, LLP, our lawyers work diligently to protect our clients’ rights. If you need legal assistance in Los Angeles, please contact us at (310) 817-6904.