Indiana Law Blog
Introduction
Divorce often involves dividing property and assets, that range from houses, retirement accounts, vehicles, business ownership and all kinds of personal belongings. For the tech-forward, another growing segment of property is being found in these cases: cryptocurrency stored in “cold storage.” If you or your spouse hold digital assets offline on a hardware wallet or similar device, it can raise unexpected questions and issues during the divorce process.
What Is Cold-Storage Cryptocurrency?
Cold storage refers to keeping cryptocurrency offline — usually on a hardware wallet, USB drive, or even paper key — instead of on an online exchange. This makes the assets less vulnerable to hacking, but it also makes them harder to track in legal proceedings.
Here is a link for further reading from Investopedia.
For purposes of divorce, cryptocurrency is considered property under Indiana law, meaning it can be divided just like a bank account or investment portfolio.
Challenges in Divorce Cases
1. Disclosure and Honesty
In Indiana divorces, both parties are required to fully disclose all assets. Failing to disclose cryptocurrency holdings — whether in cold storage or on an exchange — can lead to serious legal consequences, including the court awarding a greater share of marital property to the other spouse.
2. Valuation
Unlike a bank account with a fixed dollar balance, cryptocurrency values fluctuate significantly. Courts and attorneys often use the fair market value on a specific date — such as the filing date or another agreed-upon time — but this can be complicated if assets are locked in cold storage.
3. Division and Transfer
Because cold-storage wallets require access keys and sometimes specific devices, dividing cryptocurrency may involve technical steps beyond simple account transfers. Both parties may need assistance from a professional who understands blockchain transactions.
4. Enforcement Issues
If one spouse suspects the other is hiding crypto in cold storage, proving it can be difficult. Courts may require subpoenas, forensic analysis, or expert testimony to uncover hidden holdings.
5. How Disclosure Happens is Crucial(!).
For the unaware, disclosure and access could be confused. Nearly all cryptocurrency transactions happen on public blockchains, which mean that everyone that is interested can look up all transactions that a particular address engaged in. That means that it may be necessary to disclose your address, but you should be very resistant to disclose your access code (or phrase/pin/passcode/ect.) at all.
Practical Takeaways
- Full Disclosure is Required: Whether you have $500 or $50,000 in crypto, Indiana courts require you to disclose it during divorce.
- Get a Professional Valuation: Cryptocurrency’s volatility makes accurate valuation crucial.
- Work With Knowledgeable Counsel: Handling digital assets requires both legal and technical insight.
- Plan Ahead: If you know crypto is involved, address it early in settlement discussions rather than waiting until trial.
Dividing cryptocurrency — especially when it’s stored offline in cold storage — adds a layer of complexity to divorce proceedings. If you’re facing divorce and own or suspect your spouse owns cryptocurrency, don’t navigate this alone.
Contact the attorneys at Harshman Ponist Smith & Rayl, LLC. We’re here to help with your legal concerns in Indiana.