How crypto is becoming a massive divorce problem

Crypto holdings are becoming a huge sticking point in divorce courts, say Russian lawyers.

Bitcoin and altcoin holdings, along with stock options, are the “most difficult assets to divide during divorce proceedings,” Anastasia Madi, a family law attorney at the legal firm Kislov Law, told Russian media outlet RBC Pro.

And the number of crypto-related divorce disputes will increase as the popularity of crypto continues to grow in Russia, legal experts told Russian newspaper Izvestia.

As courts can only denominate the monetary worth of tangible and intangible items in fiat currencies, lawyers require specialists to “determine the value of cryptocurrencies,” the experts said.

Divorce rates in Russia are among the highest in the world, and have peaked at almost five per 1,000 people in recent years. And with crypto ownership also on the rise in Russia, civil law courts in the country could be about to get very busy indeed.

Calculation problems

Russian law was amended in 2020 to recognise crypto as a form of intangible property. This means Bitcoin and other tokens are classified as “marital property” in the eyes of the law, Madi said.

However, she said that “in practice,” proving exactly who owns crypto and calculating the assets’ exact value in rubles is less straightforward.

The fact that crypto is stored in password- and private key-protected wallets adds another layer of complexity to the matter, the lawyer said.

If one of the partners “conceals their private keys or passwords,” civil court lawyers have few resources to help them force the partner to hand over this information.

If a partner transfers their crypto to another wallet during the course of proceedings, even “proving the existence” of the crypto can become extremely difficult, Madi said.

In such situations, courts may simply refuse to divide crypto holdings “due to a lack of evidence,” she added.

A civil law court in Krasnodar last year turned down a woman’s request for the division of what she claimed were shared crypto holdings because she could not prove the existence of these coins to the judge, Izvestia wrote.

Lawmaker’s solution

Other legal experts agree that crypto presents family lawyers with a unique challenge.

“The anonymity of cryptocurrency is both its advantage and disadvantage: confidentiality protects the owners, but it makes division almost impossible,” Olga Dovgilova, managing partner of the Dovgilova & Partners Law Firm, told Russian media outlet Gazeta Ru last year. “What’s more, international crypto exchanges and blockchain platforms are not obliged to provide any information to Russian courts.”

Lawmakers are already aware of the problem. And one has drafted legislation that may help lawyers and courts out of the quagmire.

In October, Igor Antropenko, a member of the State Duma Committee on Industry and Trade, presented parliament with a bill proposing that crypto bought by either partner during a marriage be considered “joint property.”

Antropenko’s proposal also stipulates that any crypto acquired before marriage or received as a gift should “remain the sole property of the owner.”

The lawmaker also submitted the bill to the central bank, which has yet to comment on the matter.

Tim Alper is a News Correspondent at DL News. Got a tip? Email him at [email protected].