Cryptocurrency Division in Divorce Sparks Legal and Technical Challenges

Cryptocurrency ownership is no longer confined to tech circles, but has entered the realm of personal and legal life, particularly in divorce proceedings. A growing concern for divorcing couples is whether they can divide digital assets—specifically, a private key—equitably. The answer is clear: a private key cannot be split in half. As a unique, unbreakable string of data, it must remain whole to access the associated cryptocurrency wallet. Any attempt to divide it manually risks permanent loss of funds[1].

This challenge has not gone unnoticed by courts. In jurisdictions like South Korea and the United States, cryptocurrency is increasingly recognized as an intangible marital asset. This means it is subject to the same division rules as real estate or financial accounts. Courts may even issue orders to investigate and trace hidden crypto assets using blockchain analytics[1].

Despite the technical limitations of private keys, there are secure and legal methods to share or split access to crypto. Shamir’s Secret Sharing (SSS) is one such method. It allows a private key to be split into multiple "shares," with a predefined number required to reconstruct the key. For example, a key can be divided into three parts, with any two shares sufficient to access the wallet. This provides redundancy and security while ensuring that no single party can unilaterally control the funds[1].

Multisignature wallets (multisig) offer another solution. These wallets require multiple private keys to authorize transactions, akin to a digital safe that needs multiple keys to open. In a typical two-of-three setup, one key might be held by each spouse, with a third key kept by a neutral party such as a lawyer or mediator. This prevents unilateral actions and encourages cooperation, making it a popular tool in divorce and estate planning[1].

In cases where trust is especially low, custodial services or legal escrow agreements can be used. A neutral third party, such as a law firm or crypto custodian, holds the private key and executes transactions based on a legal agreement. This ensures that both parties receive their fair share of the asset, or its equivalent in another form, without the risk of premature movement of funds[1].

Real-world examples highlight the increasing relevance of these issues. In a high-profile case in New York, a wife discovered her husband had hidden 12 BTC (valued at $500,000) during their divorce. This case underscores how easily crypto can be concealed and the growing role of forensic accountants and blockchain analysis in uncovering such assets[1].

While the volatility of crypto complicates its valuation, courts and attorneys are developing frameworks to address this. One common approach is to agree on a specific valuation date or use an average to determine the asset’s worth. This helps ensure that the division remains fair despite market fluctuations.

The implications of these tools extend beyond divorce. They are also relevant in estate planning, family trusts, and business partnerships. For instance, multisig wallets and Shamir’s Secret Sharing can ensure that heirs gain secure access to crypto after the death of a family member, while business partners can jointly manage company funds without unilateral control[1].

Ultimately, while cryptocurrency may be digital, its ownership and division are deeply human issues. The inability to split a private key in half does not mean crypto cannot be shared or divided responsibly. With the right tools and legal structures, couples and families can navigate the complexities of digital asset ownership in divorce and beyond[1].

Source: [1] Can you split a private key in half? Understanding crypto ownership in divorce and beyond (https://coinmarketcap.com/community/articles/6895e20605f6c41c6f2e4326/)