A growing number of people in Alabama are exploring the world of cryptocurrency investments, joining over 20 million people across the country with some form of crypto holdings. However, as more people buy bitcoin, ethereum, and other cryptocurrencies, they have also become a contested issue in divorce proceedings. The values of some cryptocurrencies, like bitcoin, have shot up dramatically over the years, with early investors reaping significant gains. Other currencies have been far more volatile.
The Crypto market reaches $2 trillion
As the crypto space grows and new investors enter the market, the market value of all digital currencies has risen to $2 trillion. Unlike traditional assets, however, it may be more difficult for spouses to understand the extent of each other’s cryptocurrency holdings or agree on a valuation for these assets. For example, during the divorce, a more volatile cryptocurrency may rapidly change in value, affecting other decisions about asset division. Taxes are another factor that can complicate cryptocurrency division and valuation, especially as sales of appreciated cryptocurrency are subject to capital gains taxes.
Complications of cryptocurrency in a divorce
Other more contested divorces may face a range of issues involving cryptocurrency. A crypto-holding spouse may attempt to hide assets from the other party by not revealing certain wallets or accounts, especially funds that are held outside exchanges that report tax data. In these cases, the other spouse may seek the help of a cryptocurrency expert during divorce litigation.
Tax issues may also emerge during this process, especially for long-term crypto investors. The IRS has become more aggressive in recent years in going after cryptocurrency holders who did not report their profits or pay taxes, and such audits may have consequences for both spouses if they filed jointly.