What types of assets can my spouse have in crypto? How can I find out?

The four main types of crypto assets are cryptocurrencies, utility tokens, security tokens, and non-fungible tokens (NFTs). Crypto assets are one of many types of assets that a couple acquires during a marriage. As other assets, crypto assets may be considered equitable property. Alabama is an equitable distribution state. When a couple cannot agree as to how to divide property, the court will divide the property in a manner it considers fair. The first step for a court to consider the division of a crypto asset is disclosure of the asset’s existence and value.

Definitions of crypto assets

A cryptocurrency is a digital currency with a record kept by a decentralized, encoded system. There are many types of cryptocurrencies, including Bitcoin, Ether, Binance Coin, and XRP. A cryptocurrency is considered a “coin” rather than a “token.”

A token is not considered currency. It is a programmable item with a contract for a digital or real asset. A utility token can be used to access or purchase a specific product or service, such as electricity. The provider of the product usually issues such tokens, to be used in that entity’s network.

A security token is sold or auctioned to allow a business to raise money to fund an idea or the company itself. A security token may come with a right relating to the business, such as voting rights, profit sharing, and dividends. A non-fungible token exists on a record of digital transactions to record the fact that a party owns a real or digital item, from a work of art to a song. One NFT cannot be exchanged for another. This is because each NFT is unique.

Finding Crypto Assets

A party who is divorcing their spouse can identify their crypto assets in a number of ways. Here are some of the methods:

• A party discloses their crypto assets to their spouse, informally in conversation prior to the divorce or formally through a complete disclosure of economic status during the divorce process.
• A party hires a forensic accountant to investigate and verify the assets that their spouse owns.
• A party discovers the assets in their spouse’s digital wallet, a virtual space that allows a user to manage and trade coins.
• A party finds emails relating to a spouse’s purchase of coins and/or tokens in the spouse’s email, bank, or crypto-acquisition specific accounts. A party may look for cryptocurrency ticker symbols to begin a search. The party may also search and discover login and password information relating to crypto accounts on a spouse’s tablet, smartphone, or personal computer.
• A party finds emails regarding crypto exchanges or transfers on their spouse’s bank statements.
• A party finds records of cryptocurrency or unexplained income that appears to be related to cryptocurrencies on their spouse’s tax returns.
• A party finds information about cryptocurrencies listed as assets on a spouse’s or family business’s loan application.
• The party’s attorney receives subpoenaed records of the spouse’s U.S.-based or foreign exchange of cryptocurrency.
• A party discovers records of a spouse earning cryptocurrency by mining the blockchain, a digital record of transactions relating to cryptocurrencies.
• A party discovers records of a spouse receiving cryptocurrency as a gift or being purchased from a peer on a cryptocurrency ATM or a website that functions as a marketplace.
• A party discovers records of a spouse making payments for goods or services in a cryptocurrency.

Generally, older cryptocurrencies like Bitcoin are easier to uncover. New cryptocurrencies like Monero are harder to discover.

How to Divide Crypto Assets

Usually, when a spouse purchases a crypto asset with money earned during the marriage, the value of the crypto asset or the crypto asset itself may be considered for equitable distribution. When a spouse inherits or is gifted a crypto asset from another party during the marriage, the crypto asset is considered the separate property of that spouse. The court will not consider it for equitable distribution.

The volatility of the crypto market makes it difficult to estimate the value of a crypto asset. The parties can engage in research to estimate and agree on the value of a crypto asset to overcome this obstacle. A party whose spouse has a substantial amount of money in crypto assets may want to consider hiring a crypto asset specialist and/or a forensic account. These experts can help them learn where the assets may be sited and what the assets are worth. A spouse who conceals a crypto asset during the divorce process may face penalties from the court. Even in an uncontested divorce in Montgomery County, it is important to be transparent with your spouse.