How Is Cryptocurrency Handled in a Colorado Divorce?

Marriages begin with high hopes for a long life together and no one expects their walk down the aisle to end at divorce court. Sadly, a significant number of Colorado marriages end in divorce as spouses head down different paths in their lives. In Colorado, divorcing spouses may retain only assets they owned before marriage and must equitably divide their marital assets. This isn’t always a straightforward process, since spouses often purposely and inadvertently commingle their separate assets during marriage.

For instance, one spouse may have a valid claim on real-estate property belonging to the other spouse if they invested significant money or time into improving the property. Bank and investment accounts sometimes become commingled when one spouse grants the spouse access to the account. But now that the issue of cryptocurrency is often thrown into the marital mix, many spouses facing divorce wonder, “How is cryptocurrency handled in Colorado divorce?”

Understanding Cryptocurrency

Cryptocurrency is a non-tangible digital asset built with blockchain technology to store and transfer financial value online. It’s a decentralized, borderless ledger system that isn’t regulated by any country or financial institution, making it easy to seamlessly trade or invest in any worldwide location.

Cryptocurrency is considered an asset just like any other investment holding, which means it’s subject to equitable distribution as a marital asset unless the account belonged to one spouse alone before the marriage or was inherited by a spouse or gifted to one spouse alone during the marriage and remained a separate asset. 

More than 20% of Americans currently have cryptocurrency holdings. Handling cryptocurrency during a divorce under Colorado’s equitable division of marital asset laws becomes more complex to navigate than typical assets because this form of financial asset can be difficult to track, trace, and define. It’s also more easily hidden compared to other types of assets.

Cryptocurrency As Marital Property

Under Colorado’s marital property law, all assets and debts a married couple accumulates during the marriage are subject to equitable or fair distribution between both spouses if not strictly 50/50 division during a divorce. Under this law, spouses can negotiate their own divorce settlement agreement trading one asset for another of equal value as long as both parties agree. If they aren’t able to come to mutually acceptable terms together or through their attorneys and mediation, a judge decides on the terms of the marital property distribution, including cryptocurrency holdings added to a couple’s investment portfolio during their marriage. During financial disclosure, each spouse is obligated to reveal any cryptocurrency holdings, but in some cases, it’s difficult to define digital holdings that are intentionally designed for privacy and anonymity. In the event you are dealing with a high-asset divorce, contact our high-asset divorce lawyers in Fort Collins today.

Non-pattern Requests for Cryptocurrency

Colorado’s Supreme Court has a list of approved requests for financial document disclosure during a divorce. These pattern requests are consistent in any Colorado divorce; however, one spouse’s attorney may also request up to 10 non-pattern requests or requests for information outside of the norm. In most of today’s divorces, cryptocurrency holdings fall into these non-pattern requests for financial disclosure for every type of digital currency account. 

Once spouses have full access to information about cryptocurrency accounts, they can value the accounts, determine how much of the account is a marital asset, and equitably divide the account between spouses.

Dividing Cryptocurrency During Divorce

Spouses and their family law attorneys can discuss the best way to divide cryptocurrency as a marital asset either by transferring one spouse’s portion into a separate digital wallet, distributing it as a cash amount, or trading it for assets of equal value.