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By 2030, the cryptocurrency market is projected to exceed $3 trillion in global value. As digital assets become increasingly prevalent, understanding how such holdings are identified, valued, and distributed in the context of a New York divorce is no longer optional, but imperative. Cryptocurrencies such as Bitcoin were designed to function outside of traditional financial systems, eliminating the need for regulatory oversight by banks or governmental entities. Examples of other well-known digital currencies include Ethereum, Litecoin, Zcash, Dash, and Ripple. While the anonymity and decentralization of these assets appeal to many investors, these same features can present significant challenges in matrimonial proceedings, particularly when it comes to discovery, valuation, and equitable distribution under New York Domestic Relations Law.
What is Crypto?
Cryptocurrency, or "crypto," is a form of digital currency created and maintained through cryptography, a method of encrypting and securing data. Unlike traditional currencies backed by a government or central bank, cryptocurrency exists entirely in digital form and derives its value through decentralized systems of verification and exchange.
These transactions occur on a blockchain, a distributed ledger that records each transaction across a network of computers. The blockchain ensures that data cannot be altered retroactively, making it both transparent and secure. However, because there is no central authority or database, cryptocurrency holdings can be difficult to trace.
For matrimonial attorneys and litigants in New York, this creates unique considerations. The potential for a party to conceal or undervalue cryptocurrency assets underscores the importance of thorough financial discovery, expert tracing, and proper valuation methods when addressing equitable distribution of marital property.
How is Cryptocurrency Handled During a Divorce in New York State?
In New York State, the legal framework surrounding cryptocurrency significantly transformed as the popularity of cryptocurrencies has evolved. Navigating a divorce proceeding where cryptocurrency applies requires a clear understanding of its treatment as marital property. Previously viewed as undefined assets, cryptocurrencies are now recognized as marital property under New York state law. Accordingly, absent an agreement to the contrary, cryptocurrency acquired during the marriage is subject to equitable distribution (provided same is not classified as separate property under DRL Sc. 236B) between the spouses during divorce proceedings.
In determining equitable distribution, (what is fair under the law) New York courts will consider a variety of statutory factors, including the duration of the marriage, the income and earning capacity of each party, contributions made to the marital partnership, and any evidence of waste or concealment of assets. Since cryptocurrency can be easily transferred or held in digital wallets that lack conventional paper trails, parties and their attorneys must engage in diligent discovery and investment tracing efforts to ensure that all holdings are fully disclosed and fairly appraised.
Accurate Valuation of Crypto Assets
The significant volatility in the crypto market can prove to be a major issue when attorneys try to value it as marital asset. To ensure a fair valuation, consider hiring financial professionals specializing in the valuation of digital assets. These experts can help ascertain an accurate value and consider market fluctuations to ensure the division is equitable.
The emergence of cryptocurrency represents a profound intersection between the law and technology in modern matrimonial practice. For practitioners, this evolution underscores the importance of remaining informed about new trends in the technological and investment landscape. Accordingly, as the financial landscape continues to evolve with cryptocurrencies and digital assets, the strategies and perspectives of the matrimonial attorneys who navigate it must also evolve.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
