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Cryptocurrency and divorce: What you need to know

Digital assets like Bitcoin and Litecoin have attracted a growing number of investors in recent years -- yet, cryptocurrency is still far from mainstream. That can make dividing the assets in a divorce -- or even finding them -- difficult.

"Virtual currency" has been around for about a decade, but it's still an unregulated market that is prone to wild fluctuations in value. Those fluctuations make it very difficult to assign a consistent value to any cryptocurrency investments you or your spouse may have. After all, what might be valued at $20,000 at the start of your divorce could be worth 10 times that amount by the end of it -- or it could only be worth $2,000.

Another problem with cryptocurrency is the assets were designed to be difficult to trace. All cryptocurrency is secured with an encryption key and stored outside of traditional systems for storing wealth. While divorcing spouses are supposed to disclose all of their assets to each other during a divorce so that everything can be fairly divided, some spouses may see cryptocurrency as the perfect way to hide the money they don't want to split.

They may be right -- particularly if they possess the financial sophistication common to wealthy investors. As one attorney put it, "It's really hard to trace if the individual knows what they're doing." Forensic accountants may have to be called in to look for money that has seemingly vanished after it has been funneled into crypto investments.

If cryptocurrency is likely to be an issue in your divorce -- or you suspect that your spouse has been hiding money in Bitcoin or another type of crypto, it's smart to address this issue with your attorney early. That way, you can develop a strategy to ensure a fair split of the assets.

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