Guide to Asset Division in the Crypto Community: How Are Digital Assets Divided During Divorce?

Original Authors: Liu Fuqi and Jin Weilin

Introduction

In traditional divorce cases, dividing property is like a straightforward card game—real estate, savings, stocks—all traceable and clear. But when cryptocurrencies enter the marriage, the rules suddenly become blurred.

“During the marriage, the other party accumulated a large amount of cryptocurrency worth a significant sum. However, in court, they deny possession and refuse to turn it over. They can’t produce any evidence, so all the cryptocurrencies that might have belonged to the couple are just watched being withheld openly…”

Cases like these are increasingly appearing in courts around the world. As cryptocurrencies become more widespread, the division of property in divorce faces new challenges. Their anonymity and untraceability make the boundaries of “joint property” more ambiguous than ever.

Legal Definition: Cryptocurrencies in Marriage

First, according to the 2013 “Notice on Preventing Risks of Bitcoin” issued by the People’s Bank of China and other ministries, and the 2021 “Notice on Further Preventing and Disposing of Virtual Currency Trading Risks,” cryptocurrencies and other “virtual currencies” are not recognized as legal tender and do not possess the monetary attributes of legal currency, such as legal compensation or enforceability.

However, the same notices clearly define them as “virtual commodities,” meaning that although cryptocurrencies are not “money,” as a form of property rights, their status as virtual commodities should be protected by law. Cryptocurrency holders have exclusive rights to manage and trade specific virtual currencies, making their attributes similar to virtual commodities and thus possessing property rights.

Secondly, to divide any property within a marriage, the primary legal prerequisite is to recognize it as marital joint property, and cryptocurrencies are no exception.

Relevant legal provisions include:

• Article 1062 of the Civil Code states that income from production, operation, or investment during the marriage belongs to the couple’s joint property.
• The explanations of the Marriage and Family section of the Civil Code (Articles 25 and 26) clarify that income from investments made by either spouse during the marriage and income generated from personal property during the marriage should be considered joint property.

These provisions show that whether cryptocurrencies are jointly invested by both spouses or earned through one spouse’s personal business, as long as they arise during the marriage, their legal nature can be recognized as joint property, allowing for division upon divorce.

Judicial Practice: How Difficulties Affect Rulings

Although the law has established the principle that cryptocurrencies can be divided, their decentralized and anonymous nature makes it easy for one party to hide assets during divorce, creating core challenges in property division.

(1) Evidence Collection Difficulties

The anonymity of cryptocurrencies makes it hard for the claiming party to prove the existence of assets. Without key evidence such as wallet addresses and transaction records, courts cannot confirm the assets’ existence, leading to dismissals due to “insufficient evidence.”

For example, in a cryptocurrency compensation dispute case (1), since the involved platform had long ceased operations and neither party could provide transfer or transaction records within the statutory period, the court found it impossible to determine the asset status. As a result, the court ruled that the evidence was insufficient and dismissed the appeal.

(2) Valuation Difficulties

Cryptocurrency markets are highly volatile, lacking a unified valuation standard. If spouses do not agree on returning or quantifying the cryptocurrencies at a specific time, courts find it difficult to determine their exact value.

Even if one spouse can prove the existence of assets, whether they have agreed on the valuation method and how to handle the valuation significantly influences the court’s final decision. Common scenarios include:

1. No agreement or inability to negotiate

When spouses fail to reach an agreement on dividing cryptocurrencies, courts tend to be cautious due to their unique legal and valuation challenges. They often choose not to handle or recognize such assets.

For example, in the case of “Liu vs. Lei and Geng (2),” Liu claimed to have paid most of the house purchase price with virtual currency. However, the court did not recognize this because Liu could not prove mutual agreement and virtual currency transactions are not protected by law.

2. Clear agreement

If spouses have reached a written agreement on cryptocurrencies, courts generally support and respect their mutual arrangements. The key is that the agreement is clear and specific. Two cases illustrate this:

• Case 1 (3): The couple explicitly agreed on the amount and payment schedule for the digital currency’s valuation in their divorce agreement. The court upheld the agreement and supported the plaintiff’s claim.
• Case 2 ((4): Although they signed a loan contract stating the loan was in RMB, the actual transfer was in cryptocurrency, and the conversion rate was not specified. The court found the contract invalid and rejected the repayment claim.

The critical difference lies in whether there is a clear, reasonable value conversion chain. In practice, if both parties agree explicitly on the value and handling of cryptocurrencies, courts may recognize it; otherwise, due to the lack of a standard valuation and legal recognition, courts tend to not process or value such assets.

(3) Enforcement Difficulties

Enforcing cryptocurrency division faces unique hurdles: courts cannot directly control private keys like they can freeze bank accounts. Even if a court orders the transfer of assets, if the holder refuses to surrender the private key or claims it is lost, the judiciary lacks effective enforcement tools.

For example, in the case of Lu vs. Lu (5), the court ordered Lu to deliver 60 units of a certain cryptocurrency or pay 4.83 million RMB. During enforcement, the court found that aside from 22,000 RMB in bank deposits, Lu had no other assets available. Ultimately, only the small bank deposit could be seized, and the case was closed due to “no available assets for enforcement.”

Mankiw’s Advice: What Should Ordinary People Do?

Given the challenges in evidence collection, valuation, and enforcement, here are practical steps to make property division smoother and more secure:

• Secure Evidence Early

Because cryptocurrencies are anonymous and easily transferable, preserving evidence is crucial. During the marriage, systematically document and secure relevant information such as wallet addresses, private keys, transaction records, and, if possible, have professional agencies appraise the assets. Keep physical devices like cold wallets as well to establish a complete evidence chain, laying a foundation for rights claims or enforcement.

• Sign Written Agreements

It’s advisable for spouses to sign a written agreement early on, clearly defining the valuation method and division plan for cryptocurrencies. The agreement should specify whether to divide assets physically or through compensation, ensuring clarity in the conversion process and enforcement measures. Given the market’s volatility, a comprehensive agreement can help prevent issues where courts refuse to recognize or value cryptocurrencies due to legal or practical uncertainties.

• Separate Property Management

For assets intended as personal property, use separate wallets or accounts to distinguish them from joint assets. Clear boundaries help protect individual property rights and make it easier to define the scope of division in disputes, reducing unnecessary conflicts.

• Seek Legal Assistance

Cryptocurrency cases are complex and require specialized legal knowledge. Consult experienced lawyers early in drafting agreements, defining property boundaries, and handling disputes to better manage risks and improve the chances of rights realization.

Conclusion

Dividing property in marriage involving cryptocurrencies is a new frontier filled with challenges.

While courts have begun recognizing cryptocurrencies as “virtual commodities” with property attributes, their anonymity, market volatility, and enforcement difficulties still pose significant hurdles.

Therefore, proactive management and written agreements during the marriage are key to reducing disputes. If parties cannot reach consensus, seeking legal advice early and establishing clear, documented arrangements can help ensure a more respectful and dignified resolution—often better than costly court battles.