The increasing mainstream adoption of cryptocurrency has made it a valuable asset in today’s society. However, its decentralized nature and potential for significant growth over a short timeframe poses a unique challenge to couples going through a divorce. Many of them wonder how cryptocurrency will be divided during divorce proceedings. Please continue reading to learn how cryptocurrency is handled in a New Jersey divorce and how a talented Monmouth County Division of Assets Attorney can help you navigate this complex process.

What is Cryptocurrency?

Cryptocurrency is an alternative decentralized digital currency that is based on blockchain technology. Cryptocurrencies, such as Bitcoin and Ethereum, use computer networks for transactions and digital asset storage. They are not controlled or reliant on the government or other central authorities. Cryptocurrencies are not based on actual assets but butly and demand. This makes them challenging to measure in terms of value. However, you can buy, sell, spend, and trade on exchanges for regular products and services. It’s crucial to understand that cryptocurrency exists purely in a digital format.

How is Cryptocurrency Divided in a New Jersey Divorce?

During the discovery phase of a divorce, each spouse must disclose a complete and accurate picture of their financial standing individually and as a married couple. This includes disclosing bank accounts. However, due to cryptocurrencies’ decentralized nature and intrinsic value, they are technically not considered money. This creates a gray area in divorce, as a spouse can potentially hide these assets because cryptographic methods secure them. Unlike most central banking authorities, cryptocurrencies have no records, meaning they cannot be located or accessed without a “private key.” Divorcing parties must disclose all property owned between them, including cryptocurrency. It’s crucial to note that cryptocurrency holdings are often classified as business, investment, or personal property. As such, they are treated as property for federal tax purposes, making them subject to division in divorce.

Like other fluid investments, cryptocurrency can change in value over time, usually increasingly substantially. This can make it challenging to accurately appraise the cryptocurrency’s value as a martial asset. However, in most cases, the valuation date is the day the parties separated. This means the value of the cryptocurrency could significantly change by the time your divorce is finalized.

Marital property is divided in accordance with equitable distribution principles. This means that a couple’s marital assets will be decided in a manner deemed fair but not necessarily equal. Therefore, one spouse could receive a more significant portion of the marital property if the court considers it equitable. Since cryptocurrency is treated as property in a divorce, if it was acquired during the marriage using marital funds, it would be considered marital property. However, if one spouse acquired it before marriage using separate funds, it would be regarded as separate property and not subject to division.

As you can see, handling cryptocurrency during divorce proceedings can be tricky. At Paone Zaleski & Murphy, we understand the unique challenges you face during property distribution. Our legal team is prepared to help you secure a fair distribution of your marital assets. Contact us today to discuss your case.