Property Division, Sharing & The Matrimonial Home

Bitcoin & Divorce: Can My Spouse Get My Crypto If We Divorce?

Written by Russell Alexander ria@russellalexander.com / (905) 655-6335

The emergence of cryptocurrencies such as Bitcoin, Ethereum, Dogecoin, and others have entered the cultural zeitgeist in a major way in recent years. But what impact does the holding (or hodling) of cryptocurrencies have on marital assets and separation? In short, not much.

For those who do not know what cryptocurrencies are, they are simply a digital currency that is backed by cryptography (i.e., the use of mathematics to ensure their security). There is a lot more to cryptocurrencies and their societal impact than meets the eye. For example, the underlying technology of blockchain has the potential to be used for many things other than digital currencies, and the security/anonymity these forms of “money” enable may lead to large economic changes.

However, for the purposes of this blog we will address how cryptocurrencies impact the process of going through a divorce/separation. To accurately discuss this we must first classify the uniqueness of cryptocurrencies into three categories: (1) its value, (2) its anonymity, and (3) its security.

1) Value

In Ontario family law each party is required to complete full financial disclosure. This means that each party will complete a financial statement outlining their assets and debts throughout the relationship.

This is where the impact of bitcoin comes to the fore because it will be treated as an asset to be equalized based on the current market value of the coins or satoshi’s. This is akin to the impact that stocks or other investments have on the party’s financials.

For example, if an individual was to have 1 bitcoin in their possession, then this would be considered as an asset worth ~$50,000 CAD (depending on the market value that day). This value would then be put towards the assets of the individual who is in possession of it and be considered with respect to the parties’ equalization. In essence, the party in possession of the cryptocurrency will be able to keep their coins, ethers, etc., so long as they can pay the equalization amount in cash.

An interesting part of cryptocurrencies, at least at this stage, is that they are extremely volatile. This means that their values are constantly fluctuating and the equalization payments can change drastically as well. In recent blog we discussed how the 2020 stock market downfall had led to a lot of wealthy people to divorce because their assets were temporarily reduced and the equalization was lower.

On a day like today (May 19, 2021) when cryptocurrencies have taken a large fall from their all-time highs, it would not be surprising to see in the future many of the wealthy crypto whales capitalizing on this dip and use it to reduce their equalization payments.

2) Anonymity

Most cryptocurrencies pride themselves on their anonymity. This stems from the fact that there is no real identity attached to crypto wallets or transactions but merely a numerical/letter ID. However, as most crypto becomes more mainstream and individuals increasingly use regulated exchanges to buy and sell it then the anonymity factor decreases due to the exchange identification requirements.

The impact of the anonymity of cryptocurrency in relation to family law can be considered a double-edged sword. There is a benefit to it because your spouse will not be able to figure out what you are purchasing or selling through the crypto’s medium of exchange abilities. Yet, this does not mean that you cannot disclose it because it is an asset and as such they must be disclosed under law.

3) Security

Cryptocurrencies are supported and secured by math and a major appeal to them is their security from third-parties such as banks and even governments. There are numerous ways a third-party can steal your assets today either through hacking accounts, state intervention, or even physically robbing you. However, cryptocurrencies are unique because if you are truly committed to the safety of them then you can simply memorize your key and it will be safe from anyone and everything absent future mind-reading technologies.

The security features of cryptocurrency can be beneficial in a family law context because, to put it plainly, your spouse will not be able to access it and spend it in a malicious manner. This is an unfortunate occurrence in family law matters where one spouse is either reckless or intentionally spends all of the others’ money. With cryptocurrencies, this maliciousness becomes much more difficult assuming that the other spouse does not know your key.

Conclusion

The future of this technology is uncertain with some nations banning its use altogether and the present volatility of them. Regardless, the emergence of cryptocurrencies is a very interesting phenomenon that we suspect will have a large impact on family law matters as their use become more and more common.

*Please be advised that NONE of the information contained within the article is financial advice and we are in no way responsible for the investing choices of our readers.

If you are going through a separation or other family law related issues, to ensure you understand all of your options and rights, you do not need to wait and you can get started online with us today or get in touch with us.

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About the author

Russell Alexander

Russell Alexander is the founder of Russell Alexander Collaborative Family Lawyers and is the firm’s senior partner. At Russell Alexander, our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues, including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. We have locations in Toronto, Markham, Whitby (Brooklin), Oshawa, Concord, Lindsay, and Peterborough.

For more information, visit our website, or you can call us at: 905-655-6335.