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Cryptocurrency once sounded like something from another world or an obscure, fabricated form of money. Today, many people in Colorado and across the nation own cryptocurrency as an investment. According to the United States Securities Exchange Commission, cryptocurrency markets are currently valued at more than $3 trillion. As crypto assets like Bitcoin and Ethereum continue to rise in value and in popularity, it becomes increasingly important to understand the intersection between cryptocurrency and divorce. The Colorado Divorce Law Group keeps track of the latest developments in the law, including the ever-evolving nature of bitcoin and other cryptocurrency. If you would like more information on how cryptocurrency may impact your divorce, consider contacting one of our knowledgeable family lawyers by calling (720) 593-6442.

How Does Bitcoin Work?

Cryptocurrency is a unique type of digital asset that people buy, sell, or trade securely. Cryptocurrency is not technically a form of currency. It is not controlled by the national government and circulates without a central bank.

Bitcoin is the most common type of cryptocurrency. It is supported by a technology called “blockchain” that keeps records that show who owns what. Individual blocks are linked together to form a the blockchain.

Blockchain can be tailored for certain purposes, such as:

• Using to purchase goods and services
• Storing value
• Participating in specific software programs

Division of Cryptocurrency During a Divorce

As an asset, cryptocurrency is generally subject to division during a divorce. Under Colorado Revised Statutes Title 14. Domestic Matters §14-10-113, marital property is subject to equitable division by the court. This means the court can divide martial property in such a way it determines “just” after considering all relevant factors, including:

• The contribution each spouse made to the marital property, including by contributing as a homemaker
• The value of the property distributed to each spouse
• Each spouse’s economic circumstances at the time of divorce
• The desirability of awarding the family home or the right to live in it to the spouse who has primary custody of the children
• The increase or decrease in the value of separate property during the marriage
• Depletion of separate property during the marriage for the benefit of both spouses

Before diving into the division of property, the court classifies property as marital or separate. Under Colorado law, marital property is all property acquired during the marriage except for:

• Gifts or inheritances to one spouse
• Property acquired in exchange for separate property
• Property excluded as marital property by a valid agreement between the spouses
• Property acquired by either spouse after a decree of legal separation

According to these rules, cryptocurrency can be a marital asset subject to division in a divorce if it was acquired during the marriage and not otherwise classified as separate property. Even if the cryptocurrency was acquired before the marriage, the increase in its value could be considered marital property.

Possible Ways to Divide Cryptocurrency During a Divorce

Spouses are encouraged to reach their own settlement agreement regarding how their property should be divided. They can make arrangements regarding cryptocurrency and then ask the court to approve their agreement. Some options regarding cryptocurrency and divorce may include:

• Liquidating the cryptocurrency and giving each spouse an equal or proportionate share to their ownership interest
• Dividing cryptocurrency into each spouse’s crypto wallet
• Dividing the cryptocurrency portfolio
• Exchanging one spouse’s share for other property of a similar value

Your divorce lawyer can advise you on what may make the most sense based on your particular situation.

Valuing Cryptocurrency

One of the complexities involving cryptocurrency is accurately valuing it. The price of cryptocurrency is highly volatile. It is not uncommon for its value to fluctuate by 30% in a single day. This can make determining a fair value extremely complex. A sudden fluctuation in the value of cryptocurrency one way or the other could result in an inequitable outcome. The spouses may have to agree on a conversion rate program and date to determine the value of cryptocurrency.

Hiding Cryptocurrency During a Divorce

Like any asset, cryptocurrency may be hidden during a marriage. It becomes the responsibility of the negatively affected spouse to prove its existence. One of the features that many people like about cryptocurrency is its anonymity. If one spouse is involved in the crypto market and the other spouse is not, there can be an unfair information gap between the spouses.

Having a lawyer who is familiar with cryptocurrency can be essential to ensuring that all digital assets are identified and properly valued. The Colorado Divorce Law Group is aware of the developments surrounding cryptocurrency and can advise you how cryptocurrency may impact your divorce. We may also be able to help you locate cryptocurrency by:

• Downloading a transaction history from the crypto wallet or exchange platform
• Reviewing confirmation emails or other messages that confirm crypto transactions
• Tracing Reviewing mandatory tax disclosures with the Internal Revenue Service
• Issuing a subpoena for documents related to crypto transactions
• Reviewing bank or credit card statements for possible crypto transfers
• Reviewing loan applications or other financial documents that may indicate the presence and value of crypto assets
• Conducting a deposition on your spouse in which we ask about cryptocurrency

In some cases, a cryptocurrency expert may need to be hired to help track down hidden cryptocurrency.

Consequences of Hiding Assets During a Colorado Divorce

Colorado’s Rules of Civil Procedure require divorcing spouses to fully and accurately disclose their financial situations. If one spouse hides assets during the divorce process in violation of these rules, they can face penalties from the court. This may include financial penalties or awarding the spouse who did not hide assets a higher portion of the marital property.

Contact an Experienced Colorado Divorce Lawyer for Help with Your Case

If you or your spouse own cryptocurrency and you are concerned about how it will affect your divorce, consider contacting a knowledgeable family lawyer. A divorce lawyer from the Colorado Divorce Law Group can discuss cryptocurrency and divorce and help you explore your options. Consider contacting us for a confidential consultation you can arrange by calling (720) 593-6442.