Cryptocurrency And Divorce In Washington State

Posted: Mar 27, 2019

By: Washington State Family Law Lawyer Dimitra S. Scott

Great excitement and uncertainty surround the evolving cryptocurrency market (“crypto”).   As crypto grows in popularity as an investment or form of currency exchanged in lieu of cash, so grow the issues crypto presents in divorce and legal separation cases.  Given the unknowns that the crypto industry brings, involvement of these assets in our cases can be complex.

What is cryptocurrency?

Cryptocurrency is a medium of exchange utilizing certain encryption techniques to secure transactions and control the introduction of new crypto units into the market.  Unlike traditional currency, there is no centralized power (i.e. a government) regulating the industry making cryptocurrency a unique medium of exchange.

Cryptocurrency are used for payment, as well as a dynamic and fast-growing market for investors.

Identification, Valuation, and Division in Divorce and Legal Separation

In the United States, cryptos are not a government-backed currency so it is generally treated as property. As property, cryptos require reporting during divorce proceedings.  However, identifying cryptos can be tricky.

First, you must identify whether the estate owns any cryptocurrency—not an easy task if the other spouse refuses to volunteer the information.  Cryptocurrency transactions are not necessarily linked to a real-world identity; rather, just a random chain of around 30-characters.   These transactions occur over a global network, further complicating the issue of discovery.

For investments, we can often identify the initial transaction which converted cash to crypto.  Some of the more common cryptos include Bitcoin (most common), Ethereum, Ripple, Litecoin, Monero, Dash, Augur, Waves, and NEM.

Presuming you have identified ownership in crypto, there is tremendous volatility in the value of crypto, presenting an interesting challenge for division. There are several options available to make dividing cryptocurrency as simple as possible:

  • Distribute the cryptocurrency in kind (i.e. 4 total bitcoins = 2 to Wife and 2 to Husband).
  • Liquidate the cryptocurrency and distribute the cash proceeds.

The second option creates a dilemma for the involved parties regarding the specific time to liquidate the asset because of the volatility in value.

Determination of a parties’ income is complicated when crypto is used as a form of payment.  Such a determination is necessary for an appropriate award of child support, spousal support, and an equitable division of property.  In those instances, when income cannot be determined with certainty, we look for other indications of a party’s ability to meet their own needs, pay their expenses, and fund their overall lifestyle.

Divorces and Legal Separations of all kinds, including those involving cryptocurrency, necessitate competent and experienced legal counsel. At Beresford Booth, our lawyers hold this experience and are prepared to assist you through this challenging time.

Beresford Booth PLLC (425.776.4100), www.beresfordlaw.com.

BERESFORD BOOTH PLLC has made this content available to the general public for informational purposes only. The information on this site is not intended to convey legal opinions or legal advice.

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