Cryptocurrency is undeniably entering its Golden Era. The uncertainty of its inception over ten years ago is starting to wear off as more people realize the potential for investment, as cryptocurrency offers direct control over investments and a way to avoid traditional banking and investing fees.
This rise in popularity creates a problem for modern marriages, where couples of days past asked themselves: ‘’Who gets to keep the dog?’’ the most divisive question we get today is ‘’How can I keep the bitcoin?’’
The first step in this analysis is to understand cryptocurrencies and how they can avoid traditional banking rules. There is an epidemic of undisclosed cryptocurrency assets that plague modern divorce proceedings.
What are Cryptocurrencies?
Merriam Webster defines cryptocurrencies as ‘‘any form of currency that only exists digitally, that usually has no central issuing or regulating authority but instead uses a decentralized system to record transactions and manage the issuance of new units, and that relies on cryptography to prevent counterfeiting and fraudulent transactions’’ To put it simply, cryptocurrencies are a form of currency that only exists and is stored digitally. Yes, Internet money.
The appeal of these digital currencies is that they are held by a decentralized system, which means they’re not controlled by any government or institution. The value of these isn’t based on actual assets, therefore they are valued based solely on supply and demand. In terms of distribution, these digital coins circulate via ‘distributor ledger technology’ to keep a public record of all transactions; the best known one being blockchains: two lines of code that make up a pair of keys, one private, one public. The public key serves as a transaction history for anyone who views the coin, and the private one works as a proof of ownership of however many units of currency one might have. As for safekeeping, most crypto users store their private keys in pen and paper, some keep them on encrypted folders in their computers or on USB drives, some go as far as breaking up the key and storing pieces of them separately and in different mediums!
What does crypto have to do with my divorce?
In Florida divorces, each spouse is required to exchange financial disclosures that include all assets and debts to the other spouse within a timeline. Cryptocurrency is considered as any other asset when it comes to a financial disclosure, however, it presents some unique challenges, because it's not a physical asset, its value fluctuates whimsically, and due to the blockchain system, it may be difficult to trace and pin to a certain individual.
In a perfect world, it should be simple enough to treat cryptocurrencies like we would any security, investment or holding when it comes to splitting them up fairly between spouses. Negotiations often become tricky due to the unstable value of cryptocurrency. What seems to be an amazing decision, could turn into a spectacular loss if the cryptocurrency somehow depreciates after signing the deal. Add to this the discomfort of one spouse not being in the know with the latest crypto trends, or a spouse that is not interested in cryptocurrency and prefers traditional funds instead of digital ones, and it becomes even more of a sticky situation.
As if these challenges weren't enough, the relative anonymity provided by blockchains adds up to the mess by making it difficult to locate your spouse's assets, and actually prove their ownership. Like we explained before, cryptocurrencies are not held in a bank, you can't ask for bank statements to see your account's activity over time, the only way to interact with your crypto investment is through your crypto wallet and the public and private keys you hold for your specific crypto currency. This wallet could be anything from a USB drive containing your private key, a piece of paper, a digital notebook, an email, really anything you can write on; or even an app or software meant to safely keep your keys in, some crypto users choose third-party services known as an exchange to hold the private keys, making it easy to conceal the ownership of any cryptocurrency.
How can I find my spouse’s hidden cryptocurrency?
It is your and your spouse’s responsibility to keep each other in the loop about your finances as a married couple, which includes any cryptocurrency either of you holds. Sadly, as marriages break down, so does communication. You might notice some changes in your spouse’s spending habits, suddenly they can afford that boat or that designer purse they’ve been raving about for months, seems fishy, right?
You might want to look into your finances to figure out where all this extra cash is coming from and where it is going. Keep in mind sudden financial freedom/recklessness might not mean they’re hoarding crypto right off the bat, it could also be a symptom of a much bigger problem, like gambling, addiction, or even criminal activity. In any case, whatever you find, you’re going to want to speak with an experienced divorce attorney if you have not hired one yet.
An experienced divorce attorney will ferret the hidden cryptocurrency. For instance, we can file a subpoena to gain access to your spouse’s electronic devices, seek out forensic experts to dig up all the electronically stored data and internet history in a computer, including login information, emails, bank statements, tax information, and possible crypto trading.
I found my spouse’s hidden cryptocurrency. Now what?
You did it, you found the stash! Now focus on securing that bag. You and your attorney have to make sure to document and properly file all the evidence of existing cryptocurrency holdings you have found, in order to ensure a fair division of assets when the time comes in your divorce process.
The most important step is to make sure the evidence can’t be edited in any way, as even the slightest alteration could render the evidence unusable in court on questions of its authenticity. Keep in mind, this has to be a fair fight: you can’t use evidence you found using shady methods, this includes hacking or snooping through private information that you’re not supposed to know, otherwise all your effort will be in vain, as the court will not admit the evidence, or even worse, you could find yourself in legal troubles by way of criminal charges.
Once you are on the path of negotiating how these assets should be divided, your attorney should ask the court to order that your spouse transfer the cryptocurrency they withheld to a trusted third party, to prevent the funds from ‘‘mysteriously disappearing’’ before divorce, otherwise, it can be very difficult to track, and you would have to start the treasure hunt all over again.
What is the law in Florida regarding Cryptocurrency in divorce?
The most important thing to note is that Florida is a bit different from other states when it comes to property division during divorce, as it is an equitable distribution state; this means that assets will not necessarily be 50/50, but each party will get what is considered fair to their individual situations and needs.
The Florida Supreme Court recently amended Rule 12.285 on Mandatory Disclosure, which requires cryptocurrencies to be included and any virtual transactions made in the past twelve months to be disclosed; spouses should also provide a listing of all current holdings of virtual currency, including cryptocurrency. This change comes as a response to the growing number of divorce cases where one or both spouses owned some form of cryptocurrency that required a judge to divide it equitably.
Get started with a confidential consultation
We know this is a lot of information to deal with on top of the stress and hurt of going through a divorce. That is why our firm offers you a confidential consultation to help you through the difficult divorce process, especially in dealing with an issue as complex and new as dividing your cryptocurrency in a way that is fair. We are here to protect your interest in every step of the way.