Digital Assets and Cryptocurrency: Challenges of Property Valuation
A growing number of New York divorces involve digital assets, including cryptocurrency, NFTs, and other assets that are considerably more complex than more traditional assets. Cryptocurrency transactions are recorded on the blockchain, a peer-to-peer network that tracks these transactions. There’s much less regulatory oversight than there is with conventional forms of currency and financial institutions.
If you’re navigating a New York divorce and either you or your spouse own cryptocurrency, it’s important to understand how it may be handled throughout the legal process. Under New York law, assets held by the spouses are considered marital property and are subject to division during the divorce. This requires a fair valuation, which can be difficult with digital assets.
Volatility in the Value of Cryptocurrency and Other Digital Assets
Digital assets can be extremely volatile, which makes getting a fair valuation difficult. While some cryptocurrencies, such as Bitcoin and Ethereum, are relatively stable, many smaller coins and meme coins fluctuate dramatically in value from day to day (or even hour to hour). A good example is Dogecoin. At its recent peak in December 2024, it was worth $0.45. Its lowest recent value occurred in September 2024, when it was worth $0.09. Between those times, the coin’s value changed constantly. At the time of writing, the value was $0.20. How can you properly value something that more than quadruples in value, cuts its value in half, and has no real trend you can follow?
When lawyers are working out a fair way to divide assets, assets that are constantly changing value are a headache. Divorces can take months to negotiate, during which time a crypto coin could change value hundreds of times. Consider how that may affect a divorce involving cryptocurrency. If a coin was worth $4,000 at negotiations but skyrocketed to $7,000 by the time of the divorce, the person losing out on that increased value would likely feel shorted.
Variations in Valuation Methods
There are various ways to assess the value of cryptocurrency and other digital assets, and if a couple disagrees on a valuation method, it can delay their divorce. The absolute valuation model is based on the supply of coins, the velocity, and the price level. Some experts also use the value-to-transaction ratio, which is based on the dollar value of the cryptocurrency relative to its daily transaction volume. When you have competing valuation methods, equalizing cryptocurrency, NFTs, and other assets can be an uphill battle.
Fewer Regulations Guiding Divorcing Couples
American law has some regulations in place regarding cryptocurrency, but it’s still not nearly as regulated as more conventional assets. When a couple sells cryptocurrency to divide their assets—as is often the case in divorce when one spouse is uninterested in owning cryptocurrency—capital tax may be owed, depending on the timing of the sale.
One of the main benefits of cryptocurrency is its relative anonymity. Unfortunately, this can make it easier for spouses to hide assets and keep them out of the division of assets. In one case, a divorcing New York housewife wondered why her husband—who earned $3 million per year—had no assets to split. A crypto hunter helped her track down $500,000 of Bitcoin. Forensic accountants, specifically, crypto hunters, can help spouses who think their spouse may be dabbling in digital assets. Many people who invest in crypto assume it is completely untraceable, giving them an easy way to hold onto “their” money during a divorce. But everything leaves some sort of trail—and if a high-earning spouse suddenly appears destitute on paper, it’s worth talking to your attorney about.
If you and your spouse have digital assets, it’s important to work with a divorce lawyer with experience in cryptocurrency and digital assets. We’re here to help you explore your legal options, ensure that all assets are accounted for, and advocate for you during your divorce. Call The Mandel Law Firm at 646-770-3868 or fill out our online contact form to discuss your options with our team.
