How is cryptocurrency divided in divorce?

When dividing finances and assets as part of a separation or divorce, you probably think about the ‘visible’ items, such as the house, car, shared bank account and joint debt, but what about the ‘invisible’ assets?

Dividing cryptocurrency in a divorce can be tricky. In this blog, our divorce finance lawyers explain how dividing digital assets typically works.

What is cryptocurrency?

Cryptocurrency is a digital currency. When you use crypto to purchase or pay for something, the transaction is recorded in a decentralised system and distributed among a network.

Crypto uses distributed ledger technology (DLT), which keeps data secure and means there is no single central data storage point or central authority (i.e. the Bank of England) that grants permission for crypto users to access.

Cryptocurrency is not yet regulated in the UK; however, this is evolving.

What counts as cryptocurrency?

There are over 20,000 types of cryptocurrencies; however, the main ones that you may have heard of include:

• Bitcoin (‘BTC’)
• Ethereum (‘ETH’)
• Solana (SOL)
• Dogecoin (DOGE)
• Ripple (XRP)

There are also non-fungible tokens (NFTs); these are not a cryptocurrency or bitcoin but use a similar blockchain technology. NFTs represent ownership of digital or physical assets, mostly art or collectables.

Dividing crypto assets in divorce: how does it work?

In the UK, cryptocurrency is recognised as property under the Matrimonial Causes Act 1973. Dividing cryptocurrency in a divorce, separation, or civil partnership dissolution works similarly to dividing any other marital asset. However, as crypto can be harder to trace, value, and distribute, there are some extra measures your lawyer will need to take.

When deciphering how to divide cryptocurrency, this is what will be considered:

1. Is the cryptocurrency marital property?

Marital property means it was:

• Acquired during the marriage, or
• Became marital through mixing with joint funds

If you acquired crypto before the marriage and it was not mixed with joint money, it is usually considered a separate asset. But this will also depend upon other points, including the length of the marriage and other assets available to support the parties.

2. Have you disclosed all cryptocurrencies?

Each party has a legal duty to fully disclose their cryptocurrencies (in addition to other finances and assets). Failure to do so could lead to a court penalty.

3. Identify the cryptocurrency

When you start proceedings, it’s important to fully disclose all digital and non-digital assets you or the other party owns.

Because cryptocurrencies can be difficult to trace, it is important to speak to a divorce finance lawyer about identifying these, especially if you are worried or suspect that the other party is hiding crypto (or any other asset). Your solicitor will ask the right questions early on and may also instruct a cryptocurrency expert, if necessary.

How are cryptocurrencies divided in a divorce?

Because cryptocurrency is recognised as property, once identified and valued, it should be added to the overall ‘pot’ and divided as with any other marital asset, e.g., ‘normal’ Government-issued money (‘fiat money’).

Due to the nature of digital currencies, their value can fluctuate from one day to the next, making it difficult to achieve a fair settlement. However, the court can order for cryptocurrencies be transferred in whole or in part between spouses, unless it has been directed or agreed to be kept separate from the joint finances.

It is not possible to share an NFT, but that value can still be included within the division of assets, or it can be sold.

There will also likely be tax implications for disposing of cryptocurrencies, and these should be considered within any division of assets.

I think my ex is hiding cryptocurrency. What should I do?

Because cryptocurrency is digital, it can be easier to hide, whether as part of financial proceedings or day-to-day. If you are starting a divorce or separation and you suspect that your ex-spouse is hiding digital assets, you can ask the court for a Disclosure Order. A Disclosure Order is a legal command that forces someone to provide relevant information and evidence as part of proceedings.

If the other party fails to fully disclose digital assets, your lawyer can advise you on instructing a specialist forensic accountant to examine their bank accounts. It is rare to reach this point in finance proceedings; however, it highlights the importance of both parties being transparent and honest about their finances and the value of having an experienced lawyer at your side.

It’s also key to note that searches can also be conducted through hot or cold wallets, where cryptocurrency is stored. It’s therefore important to ensure that all possible locations have been considered or investigated.

Contact our divorce finance lawyers

Cryptocurrency is becoming more prevalent and can be extremely lucrative. A specialist solicitor can help ensure you receive your fair share in any settlement.

For advice about separating digital assets or finances as part of a divorce, separation or civil partnership dissolution, get in touch. Call us on 0117 325 2929 or fill out our online enquiry form.