The legal landscape in divorces is constantly changing, especially in high-asset divorces. One of the new hot topics is crypto assets and how they are handled in New Jersey. These include digital assets like Bitcoin, Ethereum, NFTs, etc.
What are crypto-assets?
Crypto-assets are any digital tokens or currencies that have value. Unlike traditional asset classes, crypto-assets are created and stored in decentralized computer networks. These make them secure, difficult to counterfeit and, as a result, they exist in legal gray zones for regulatory oversight. This also makes valuing them much more complicated than traditional assets, especially as their value wildly fluctuates, sometimes, even every second on crypto-exchanges.
Are they divided in a marriage?
Crypto-assets, like all other asset classes, can be New Jersey marital property. They need only have been acquired during the marriage by either spouse or acquired with marital funds. This means that, like any asset class, they are subject to our state’s equitable distribution laws, which require they be divided fairly (i.e., perhaps, but not necessarily, equally).
How are they valued in a divorce?
Valuing crypto-assets is challenging for several reasons. Pegging an actual value to any particular crypto-asset at any given time is hard because the value fluctuates constantly, and there is not even a weekend or holiday trading holds, like traditional stocks.
They are not regulated or standardized by governmental authorities, which means that a fair market value could be destroyed at any point by multiple governmental bodies. Moreover, they are exceedingly difficult to trace and verify, which makes hiding crypto-assets much easier to hide than any other asset class.
What can we do?
There are many ways to value crypto-assets, like the market approach, income approach, cost approach, etc. However, you will likely need to hire an independent expert to find a fair market value for the currency.
Though, even then, crypto-assets can have emotions and other social constructs that could affect how one spouse values those assets, separate from a fair market value. This means that they can be used by the spouses to make an agreement that both spouses find equitable that a judge may not see. As such, while they can make a high-asset divorce much more complicated, they can also serve as a pathway to a property division negotiated agreement.