In a significant legal development, South Korea has joined the growing number of countries recognising cryptocurrency as a marital asset subject to division during divorce proceedings.

This landmark decision, outlined by IPG Legal, has far-reaching implications for couples with cryptocurrency holdings.The world of cryptocurrency has not only transformed finance but has also introduced new complexities into the field of divorce proceedings. As the use of digital assets continues to grow, so too does the number of cases involving cryptocurrency-related disputes.

The Legal Framework

Under South Korean law, both tangible and intangible assets acquired during a marriage can be divided upon divorce. This includes cryptocurrencies, which have been officially classified as property due to their economic value.

The Korean Civil Act’s Article 839-2 empowers either spouse to request a division of marital assets, providing a clear legal framework for cryptocurrency distribution.

Tracking Crypto Holdings

One of the key factors in determining the value of cryptocurrency holdings during a divorce is the ability to track them effectively. Blockchain technology, the underlying foundation of cryptocurrencies, offers a transparent and secure record of all transactions. This makes it relatively straightforward to trace the history and value of crypto investments.

Discovery and Division

Spouses who are aware of their partner’s cryptocurrency exchange wallets can request a fact-finding investigation from the court. This process involves examining transaction records, wallet balances, and other relevant data to determine the value of the crypto holdings. Additionally, forensic investigations can be conducted to uncover any hidden or undisclosed crypto assets.

Once the value of the cryptocurrency holdings has been established, the spouses can choose how to divide them. They may opt to cash out the crypto and divide the proceeds, or they may decide to share the tokens directly.

A Case in Point:

A recent divorce case in New York highlighted the potential for cryptocurrency to become a focal point in marital disputes. In this instance, a wife, Sarita, discovered that her husband had secretly accumulated 12 bitcoins (BTC), valued at approximately $500,000, during their marriage. The husband had failed to disclose these holdings, leading Sarita to appoint a forensic accountant to investigate the matter.

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The Hidden Asset Problem:

The case of Sarita and her ex-husband underscores the challenges that can arise in divorces involving cryptocurrency. Unlike traditional assets, digital assets can be highly volatile and easily concealed. This makes it difficult for spouses to accurately assess their financial situation and negotiate a fair property division.

The Importance of Disclosure:

It is essential for spouses to be transparent about their cryptocurrency holdings during the divorce process. Failure to disclose such assets can lead to legal complications and potentially unfair outcomes.

If you or your spouse have invested in cryptocurrency, it is crucial to consult with a legal professional who specialises in family law and has experience handling cases involving digital assets.

Implications for the Future

This legal development in South Korea has significant implications for couples worldwide who have cryptocurrency holdings. As more countries recognise cryptocurrency as a legitimate asset class, it is likely that similar legal frameworks will be established to address its division during divorce.

Navigating the Digital Divide:

As the use of cryptocurrency continues to expand, it is likely that we will see more divorce cases involving these digital assets. It is important for individuals to be aware of the potential challenges and to take proactive steps to protect their financial interests.

By understanding the complexities of cryptocurrency and seeking appropriate legal advice, individuals can navigate the digital divide and ensure a fair and equitable divorce settlement.