Understanding cryptocurrency assets and how marital property is handled in divorce proceedings is important for parties ending a marriage with an ex-spouse who invests in cryptocurrency or other digital assets. Whether you need legal assistance finding hidden assets, understanding the tax implications of cryptocurrency in divorces, or understanding how Florida law handles cryptocurrency during the property division process, our divorce attorneys can help.
If you suspect your partner is attempting to hide and conceal assets, like Bitcoin, Ethereum, XRP, or XLM, during your divorce proceedings, you can face significant challenges during the discovery process. For legal assistance with understanding cryptocurrency, contact a Tampa crypto divorce lawyer at Quinn & Lynch, P.A.
What Is Cryptocurrency?
Cryptocurrency includes digital forms of payment in which the existence of transactions is verifiable, and records are kept through a decentralized system.
- While the government is the central authority on traditional currency, cryptocurrency doesn’t have such authority. There aren’t banks or documents that control how an individual makes transactions or stores their cryptocurrency.
- The person’s identity is protected. For example, unlike banks, this means that a user can create an account with a password, and without individual disclosure, it may take professionals to essentially identify the person.
- Cryptocurrency payments are conducted through computer networks without needing government oversight to verify it’s value.
- A person can buy or trade cryptocurrency online.
- An individual can keep cryptocurrency invested online, through an app, or on external storage, like a hard drive or cold wallet.
- People can trade cryptocurrency for cash or other cryptocurrencies.
How is Cryptocurrency Handled in a Divorce in Florida?
In typical divorce proceedings in Florida, digital assets like Bitcoin, Ethereum, XRP, and XLM are subject to equitable distribution if classified as marital assets under Florida law. How are marital assets divided in Florida divorces?
Florida follows equitable distribution statutes.
However, because cryptocurrency transactions can be difficult to track, a forensic accountant or certified divorce financial analyst in Florida may be needed to trace transactions. A Tampa divorce attorney who understands the challenges of property division with cryptocurrency accounts can help ensure all digital assets are properly disclosed, valued, and divided according to Florida divorce law.
Are Cryptocurrency Assets Marital Property in Florida?
In divorce cases, understanding cryptocurrency assets is crucial when determining whether they are part of the marital estate. The answer depends on the date of acquisition and whether the digital holdings were accumulated during the marriage. What is equitable distribution?
This is the fair division of marital property, instead of a 50/50 split, based on financial circumstances, contributions, and liabilities
The crypto market adds further challenges due to valuation fluctuations, hidden assets, and tracing digital currencies. A cryptocurrency divorce attorney in Tampa can help navigate these complexities and ensure fair treatment of these marital assets in divorce proceedings.
Common Digital Assets Subject to Division in Divorces
Bitcoin (BTC) and Major Cryptocurrencies
Major cryptocurrency assets include:
- Bitcoin (BTC)
- Ethereum (ETH)
- XRP (Ripple)
- XLM (Stellar Lumens)
- Cardano (ADA)
- Solana (SOL)
- Polkadot (DOT)
- Avalanche (AVAX)
- Litecoin (LTC)
- Dogecoin (DOGE)
- Shiba Inu (SHIB)
- Chainlink (LINK)
- Uniswap (UNI)
Digital currencies like Bitcoin (BTC), Ethereum (ETH), XRP (Ripple), and XLM (Stellar Lumens) often present challenges due to volatility and difficulty in establishing their current value during divorce proceedings. Additionally, transactions can be moved through multiple wallets with private keys or exchanges, making asset discovery more complicated if a party refuses to disclose cryptocurrency assets during or after the marriage.
Stablecoins and Virtual Currencies
The most common stablecoins and virtual currencies include:
- Tether (USDT)
- USD Coin (USDC)
- Binance USD (BUSD)
- Dai (DAI)
- TrueUSD (TUSD)
- Pax Dollar (USDP)
- Gemini Dollar (GUSD)
- Neutrino USD (USDN) (algorithmic stablecoin, high-risk)
- Frax (FRAX) (partially algorithmic stablecoin)
- Stably USD (USDS)
While stablecoins like Tether (USDT) and USD Coin (USDC) are designed to maintain a fixed value, they can still be used to conceal assets or facilitate rapid transfers. Since they are often pegged to traditional money, tracing their movement across cryptocurrency wallets (cold wallets) and financial accounts requires careful forensic analysis.
Crypto Tokens and Smart Contract Assets
These power decentralized finance (DeFi), governance systems, and blockchain automation making them integral to Web3 applications:
- Ethereum (ETH)
- Binance Coin (BNB)
- Chainlink (LINK)
- Uniswap (UNI)
- Aave (AAVE)
- Maker (MKR)
- The Graph (GRT)
- Tezos (XTZ)
- Algorand (ALGO)
- Quant (QNT)
Governance and utility tokens and DeFi assets can be held in decentralized exchanges, making them harder to track and value. Additionally, smart contracts may automatically reinvest tokens or generate income through staking or liquidity pools, further complicating their inclusion in divorce cases.
Non-Fungible Tokens (NFTs)
Popular NFTs include:
- Bored Ape Yacht Club (BAYC)
- CryptoPunks
- Mutant Ape Yacht Club (MAYC)
- Azuki
- Doodles
- Moonbirds
- Clone X
- Pudgy Penguins
- Meebits
- World of Women (WoW)
NFTs present unique challenges as their value depends on market demand and not a fixed financial value. Unlike traditional marital assets, their worth can fluctuate drastically, and proving ownership may require access to private keys and blockchain records.
Security Tokens and Tokenized Assets
The most common security Tokens and tokenized assets include:
- tZERO (TZROP)
- INX Token (INX)
- Securitize (DS Protocol Tokens)
- SPiCE VC (SPICE)
- RealT
- Harbor (R-Token)
- Tokeny (T-REX Tokens)
- Polymath (POLY / POLYX)
- Elevated Returns (Aspen Coin)
- ARTEX
Since these represent real-world investments like stocks, real estate, or bonds, dividing them in divorce proceedings is more complex. Unlike other digital assets, tokenized assets may be subject to regulatory restrictions, requiring approval before they can be transferred or liquidated. Additionally, some tokenized assets are tied to private investments, limiting accessibility and making valuation more difficult in divorce cases.
Legal Challenges in Dividing Cryptocurrency Assets During Florida Divorce Proceedings
Separate vs. Marital Assets
Establishing whether cryptocurrency assets like Bitcoin (BTC), XRP, and XLM are part of the marital estate depends on the date of acquisition and how they were managed during the marriage.
If purchased before marriage and kept separate, crypto assets may be classified as separate property, but if acquired or commingled with marital funds, they are likely marital assets. How cryptocurrency assets were stored, whether they were traded or reinvested, and whether they were mixed with marital property all play a role in their classification during Florida divorce proceedings.
Tracking Hidden Assets
Tracking hidden assets in a divorce requires involving cryptocurrency analyzing blockchain technology to uncover concealed assets spread across crypto wallets and multiple exchanges. While cryptocurrency transactions leave a paper trail, tracing them can be complex without the right expertise.
To protect the spouse who doesn’t understand cryptocurrency or cold wallets, forensic accountants specialize in identifying irregular transfers and locating hidden assets that one spouse may attempt to hide. A Tampa asset protection attorney can help ensure all digital holdings are properly disclosed and accounted for during legal proceedings.
Determining The Current Value of Cryptocurrencies
In divorce proceedings, valuing digital currencies can be challenging due to fluctuations in the crypto market. To determine the current value, courts consider the market price at a specific point, such as the filing date or final settlement. Under Florida law, if one spouse acquired cryptocurrency during the marriage, it is considered marital property and subject to division in a typical divorce settlement in Florida. Given the volatility of cryptocurrency assets, accurate valuation is crucial to ensuring a fair distribution of divorce finances in Florida.
Private Keys and Legal Discovery
In high-asset divorce cases, one spouse may try to hide crypto assets by withholding private keys, making it difficult to access or verify holdings on blockchain technology. Since cryptocurrency operates using financial information instead of relying on institutions, tracking potential marital property requires a divorce attorney who understands cryptocurrency.
During divorce proceedings, both parties are required to disclose all crypto transactions and any marital property held in digital form. However, without proper oversight, hidden assets can go undetected. A Tampa high-net-worth divorce lawyer can help uncover missing financial information, trace concealed holdings, and ensure a spouse isn’t removing marital property before the divorce.
Equitable Distribution vs. Direct Transfer
Deciding whether to sell, divide, or offset cryptocurrency assets with other holdings is a key issue in a divorce settlement, especially given the volatility of cryptocurrencies. Selling the assets converts them into traditional monetary assets. However, this also has tax implications as it could trigger capital gains taxes. Dividing the assets between spouses requires careful tracking of private keys, cold wallets, and tax records to ensure a fair split. Offsetting allows a spouse to keep the cryptocurrency assets while the other receives an equivalent value in marital property, such as real estate or investments. Each option has financial and legal implications, making proper valuation and legal guidance essential.
Challenges with Financial Institutions
Unlike traditional money, cryptocurrency is not always held by financial institutions, making it harder to track and verify through tax records and bank statements. If a spouse refuses to disclose, sell, or divide cryptocurrency assets, legal teams may need additional enforcement strategies to protect the rights of the injured party in a Florida divorce case.
Tax Implications of Cryptocurrency in Divorce
When dividing cryptocurrency assets in a divorce, couples must consider the tax implications, as transferring or selling digital assets can trigger capital gains tax. In many cases, the IRS views the transfer of crypto as a taxable event, depending on how the cryptocurrency assets are handled in divorce settlements.
If spouses divide crypto by liquidating holdings, the sale may trigger capital gains taxes, requiring accurate reporting on tax returns. Even if crypto is transferred between spouses as part of marital property division, proper documentation of crypto transactions is essential to avoid future tax liabilities. Reviewing tax records and consulting Florida divorce attorneys who understand how crypto works can help ensure compliance with IRS regulations and minimize major tax implications.
How a Tampa Cryptocurrency Divorce Lawyer Can Help
Hiring an experienced cryptocurrency divorce attorney in Tampa is crucial for navigating the complexities of digital asset division during divorce proceedings in Florida.
Properly gathering financial information, including tax returns and records from cold wallets, helps prevent disputes over cryptocurrency assets. A well-structured divorce settlement must account for both crypto assets and traditional money, ensuring a fair outcome for both spouses.
Legal steps under Florida law, such as requiring both parties to properly disclose cryptocurrency and other assets, are essential in avoiding hidden assets. As virtual currency continues to play a growing role in divorce proceedings, it is critical to determine, disclose, and divide crypto assets accurately.
Fortunately, blockchain transactions leave a paper trail, which can help track hidden assets throughout the divorce process. Working with a legal team and financial experts ensures that all crypto and traditional assets are fairly accounted for and properly divided.
To learn more about how our divorce attorneys in Tampa, FL, handle cryptocurrency divorces, call 813-223-7739.
