Mankiw's Principles | How Are Crypto Assets Divided During Divorce?

1. Introduction
   In traditional divorce cases, dividing assets is like a straightforward game—properties, savings, stocks—all traceable and clear. But when cryptocurrencies enter the marriage, the rules suddenly become blurred.
   “During the marriage, one party accumulates a large amount of cryptocurrency worth a significant sum. However, in court, the other party insists they won’t hand it over. Without any evidence, the court can only watch as those assets—potentially marital property—are rightfully theirs to keep…”
   Such cases are increasingly appearing in courts around the world. As cryptocurrency becomes more widespread, asset division in divorce faces new challenges. Its anonymity and untraceability make the boundaries of “joint property” more ambiguous than ever.

2. Legal Definition: Cryptocurrency in Marriage
   First, according to China’s 2013 “Notice on Preventing Bitcoin Risks” issued by the People’s Bank of China and other authorities, as well as 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 mandatory or enforceable qualities of money.
   However, these notices explicitly classify them as “virtual commodities,” meaning that although cryptocurrencies are not “money,” they are considered property rights and 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 possessing property characteristics.

Secondly, to divide any property within a marriage, the primary legal premise is to recognize it as marital property—cryptocurrency is no exception.

Relevant legal provisions regarding marital property 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.
• Articles 25(1) and 26 of the Marriage and Family section of the Civil Code clarify that income from investments made by one spouse during the marriage, as well as income generated from personal property after marriage, should be considered joint property.

These provisions show that whether cryptocurrencies are jointly invested or individually managed, as long as they are generated during the marriage, they can be legally recognized as joint property and divided upon divorce.

3. 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 for 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 or transaction records, courts cannot verify the assets’ existence, leading to dismissals due to “insufficient evidence.”
For example, in a cryptocurrency compensation dispute case (1), the involved platform had long ceased operations, and neither party could provide transfer or transaction records within the specified period, making asset status unclear. The court ruled that the evidence was insufficient and dismissed the appeal.

(2) Valuation Difficulties
Cryptocurrency markets are highly volatile, lacking a standardized valuation method. If spouses do not agree on the timing or method of valuation, courts find it difficult to determine an accurate value.
Even if one party can prove the assets’ existence, the court’s final decision heavily depends on whether the parties have agreed on the valuation method and how to convert the cryptocurrency into fiat currency. Two common scenarios are:

• No agreement or inability to negotiate
  When spouses fail to reach an agreement on dividing cryptocurrencies, courts tend to avoid handling or supporting such claims due to the unique legal and valuation challenges.
  For instance, in the “Liu vs. Lei and Geng house sale contract dispute” (2), Liu claimed to have paid most of the house price with virtual currency. The court refused to recognize this because Liu couldn’t prove mutual consent and virtual currency transactions are not protected by law.

• Clear agreement
  If spouses have a written agreement on cryptocurrency valuation and division, courts generally support and respect their mutual arrangements. However, the agreement must be clear and specific.
  For example:

• Case 1 (3): The divorce agreement explicitly specified the amount and payment schedule for digital currency valuation, and the court upheld the agreement.

• Case 2 ((4): Although the spouses signed a loan contract in RMB, the actual transfer was in cryptocurrency without clear conversion terms, leading the court to invalidate the contract and reject the repayment claim.
  The key difference is whether a clear, reasonable value conversion chain has been established. Courts tend to recognize agreements that specify valuation and division methods; otherwise, due to the lack of standard valuation and legal recognition, they tend to avoid or dismiss such cases.

(3) Enforcement Difficulties
Enforcement faces unique hurdles: courts cannot directly control private keys like they do with traditional bank accounts. Even if a court orders asset division, if the holder refuses to surrender the private key or claims it is lost, enforcement becomes nearly impossible.
In the case of Lu vs. Lu (5), the court ordered Lu to deliver 60 units of a certain cryptocurrency or pay approximately 4.83 million RMB. However, during enforcement, the court found the defendant had only about 22,000 RMB in bank deposits and no other assets. The court could only seize the small bank deposit and ultimately terminated the enforcement due to “no available assets.”

4. Mankun’s Advice: How Can Ordinary People Prepare?
   Given the challenges in evidence collection, valuation, and enforcement, to make asset division smoother and more secure, consider the following steps:

• Secure Evidence in Advance:
  Due to the anonymity and transferability of cryptocurrencies, preserving evidence is crucial. During the marriage, systematically document and secure relevant assets, including wallet addresses, private keys, transaction records, and, if necessary, have professional agencies appraise the assets. Keep physical devices like cold wallets to establish a complete evidence chain, laying the groundwork for future claims or enforcement.

• Sign Written Agreements:
  It’s advisable for spouses to sign a written agreement early on, clearly defining how to value and divide cryptocurrencies. The agreement should specify whether to split assets physically or via compensation, ensuring clarity in the exchange process and enforcement measures. Since cryptocurrency values fluctuate frequently, a comprehensive agreement can help prevent issues like courts refusing to recognize the legality of the assets.

• Clarify Property Boundaries:
  For assets designated as personal property, manage them through separate wallets to avoid commingling with joint property. Establishing clear boundaries protects individual property rights and simplifies division in disputes.

• Seek Legal Assistance:
  Cryptocurrency cases are highly specialized and legally complex. Consulting experienced lawyers early in drafting agreements, defining assets, and handling disputes can help mitigate risks and improve the chances of rights realization.

5. Conclusion
   Dividing assets in marriage involving cryptocurrencies has become a new challenge.
   While some courts recognize cryptocurrencies as virtual commodities with property attributes, their anonymity, price volatility, and enforcement difficulties still pose significant hurdles.
   Therefore, orderly management and written agreements regarding assets—including cryptocurrencies—are key to reducing disputes. If mutual agreement is difficult, seeking legal advice early in the process is highly recommended. Rational negotiation and respecting legal rules often leave more dignity and respect than costly court battles.