With the growing popularity of cryptocurrency and other digital assets, many spouses going through divorce in Virginia are left wondering how this type of property will be handled by the court. Like any other asset, digital property must be classified, valued, and divided — but its unique nature can make the process more complex.
Digital Assets
A digital asset is generally defined as anything that holds value which is stored digitally and is identifiable or discoverable. Common digital assets include the following:
- Cryptocurrencies – e.g. Bitcoin, Ethereum
- Non-fungible tokens (NFTs) – digital collectibles, art, music, or in-game items stored on blockchains
- Digital media – images, videos, audio files, or design files
- Domain names – website addresses that can be sold or leased
- Social media accounts and digital content – influencer accounts, blogs, YouTube channels
Equitable Distribution
Under Virginia Code § 20-107.3, the court in a Virginia divorce must consider all property of the parties whether real or personal, tangible or intangible, and determine which is separate property, which is marital property, and which is part-separate and part-marital property. The goal of equitable distribution is to fairly divide marital property, which does not necessarily mean “equally.” Digital assets, despite their intangible nature, are treated similarly to other physical assets and are subject to the equitable distribution framework. A key consideration in determining how any court would divide a digital asset is if it was acquired during the course of the marriage with marital funds, or if it was purchased prior to the marriage with separate funds.
To understand the classification of property as marital or separate and how courts divide marital property in Virginia, see our Guide to Equitable Distribution in Virginia.
Valuation
As with any property that the court divides, digital assets must be accurately valued. This can present challenges, as fluctuating market factors often create extreme volatility in asset values. Prices can swing dramatically within hours, making a valuation difficult. Additionally, some cryptocurrencies are easy to sell (Bitcoin, ETH) and others may be thinly traded or illiquid, complicating fair market value. Attorneys can utilize a financial expert to assist with valuation and ensure that clients’ property rights are protected.
Distribution
Once the digital asset has been accurately valued, a court can determine how to fairly divide it. In consideration of the equitable distribution factors listed in Virginia Code § 20-107.3(E), a court may decide to divide the asset amongst the parties, offset the value of the asset with other marital assets, liquidate and divide the proceeds, require a buyout or payment from one party to the other for the value of the asset, or any combination of these methods.
Hiding Assets
It is all-too-common that during the divorce process, people try to hide assets from their soon-to-be ex-spouse. While couples are required to be truthful and transparent during any financial disclosure process, digital assets lend themselves to deceptive practices given their inherently private and confidential ownership structure. It is important to recognize that some digital assets may be stored in a manner that is not connected to the internet, often referred to as “cold storage.” This method is widely used for its security benefits, such as protecting assets from hacking, theft, and unauthorized access, but can present issues in tracking and identifying the asset. Attorneys and the financial experts they work with can assist with tracking down digital assets through the discovery process, depositions, and the tracing of funds to or from known accounts.
Seeking Counsel
Digital assets are just as divisible as traditional assets, but may require additional attention to detail, tracing, and valuation. If you have concerns that your spouse may be hiding digital assets, or are worried about how your digital assets can be protected, be sure to discuss your options with a knowledgeable family lawyer in your area. The family law attorneys at Livesay & Myers, P.C. are experienced with digital assets and how they are handled in the courts of Northern Virginia. Contact us to schedule a consultation today.