Can Cryptocurrency Be Divided in a Divorce in Tennessee?

Cryptocurrency has become a common asset that couples may acquire during marriage. When a marriage ends in divorce, however, these holdings must be accounted for and distributed. Understanding how Tennessee courts treat cryptocurrency and how the property can be divided in a divorce is crucial for a fair property settlement. Read on and contact a Memphis, Tennessee property division lawyer for more information today.

What is Cryptocurrency?

Cryptocurrency, often shortened to crypto, is a digital or virtual form of money. Traditional currencies, like the US Dollar or Euro, are issued by central banks, but cryptocurrencies operate on what is called a blockchain. A blockchain is a decentralized ledger distributed across a vast network of computers that can record and store transactions, allowing the holders of crypto to transfer assets without a bank.

The key component of cryptocurrency is its decentralization. No single entity, like a bank or government, controls it. Transactions are secured and verified using cryptography, and once a transaction is recorded on the blockchain, it cannot be changed. The most well-known example is Bitcoin, but thousands of other types of cryptocurrency exist.

Can Cryptocurrency Be Divided in a Divorce in TN?

Yes, cryptocurrency is treated like any other asset and can be divided in a divorce, given that it meets certain criteria. As with all types of property, the court must first determine whether the crypto is marital or separately owned. Cryptocurrency that was bought or acquired during the marriage or with the use of joint funds is generally considered marital property and is therefore subject to property division.

If one spouse already owned crypto before the marriage took place, it could be treated as individually owned. However, any increase in value that occurred during the legal relationship can be distributed between the parties.

How Will Crypto Be Divided?

Tennessee is an equitable distribution state, meaning that marital assets are divided between spouses in a fair but not necessarily equal way. Courts determine an equitable division of jointly owned property by evaluating various factors, including the length of the marriage, each spouse’s earning capacity, each spouse’s age and health, each spouse’s financial needs, contributions made during the marriage, and more.

Cryptocurrency can be hard to track and identify, making it easier for a spouse to hide assets. It is crucial that the discovery process is thorough and accounts for the total value of the crypto. In addition, its value fluctuates regularly, making it unstable and difficult to calculate.
After locating all jointly owned crypto assets, the court can distribute the property in a few different ways. First, one spouse can transfer the other spouse their share of the cryptocurrency once the divorce is finalized. This is one of the simplest options. The owner of the crypto could also liquidate the assets into cash and divide the proceeds according to equitable distribution. In certain cases, a third party can receive and hold a portion of the assets until the divorce is finalized.

Because cryptocurrency is unpredictable, valuing and distributing the asset in a fair way can be challenging. If you and your spouse have concerns about this process, contact an experienced attorney at Rice Law today.