Digital assets are no longer a marginal phenomenon but part of everyday economic reality. Accordingly, property division in divorce proceedings no longer involves only apartments, cars and bank accounts, but also digital financial assets, led by cryptocurrencies such as Bitcoin and Ethereum.
The main challenge lies in the nature of these assets. Unlike traditional property, they can be relatively easy to conceal, their value can fluctuate rapidly, and proving their existence is not always straightforward. All of these factors make locating and dividing them particularly complex.
Are cryptocurrencies considered shared property?
When assets are accumulated during the course of a marriage, cryptocurrencies are treated as part of the couple’s shared property. As digital assets with monetary value, they fall under the framework of Israel’s Spouses (Property Relations) Law of 1973 and are subject to disclosure and equitable division, like any other marital asset.
Their digital, decentralized and sometimes anonymous nature does not change this legal principle.
The challenge: assets can vanish at the click of a button
One of the central difficulties is locating the assets. While real estate is registered and bank accounts can usually be traced, ownership of digital wallets does not appear in any official registry.
A spouse seeking to conceal assets can transfer funds into anonymous wallets or “cold wallets,” physical devices such as USB drives that are disconnected from the internet and easily hidden. This can effectively remove significant wealth from the view of the other party and even the court.
The intangible nature of cryptocurrency also allows holders to claim they “forgot” about the assets or “lost” access to them.
How can hidden crypto be traced?
Despite these challenges, it is sometimes possible to identify digital and physical “fingerprints” of crypto assets:
Bank records analysis: Most crypto purchases begin with transfers from bank accounts to exchanges such as Binance, Coinbase or Kraken.
Court-ordered disclosure: Courts can require access to cloud backups, email correspondence and wallet addresses.
Technology and forensic experts: Specialists in blockchain analysis can track the movement of funds between wallets, even when efforts have been made to obscure them.
Emergency orders: In cases where accounts are known and there is concern assets may be moved, courts can issue injunctions or freeze activity on trading platforms.
Valuation and division
Due to high volatility, determining the value of crypto assets is critical. Even a short delay in defining the “cut-off date,” typically the date of separation, can result in differences of hundreds of thousands of shekels.
In some cases, actuaries or crypto experts are required to provide objective valuations that reflect market trends.
There are two primary methods of dividing crypto assets:
Monetary balancing: Valuing the assets in local currency at the time of separation and transferring half the value to the other party.
In-kind division: Transferring a portion of the actual cryptocurrency to the other spouse’s digital wallet.
Legal risks and tax implications
Deliberately concealing cryptocurrency assets may be considered severe bad faith and can lead to significant sanctions, including legal costs and reduced entitlement to the assets.
Attorney Shani NuriPhoto: Sam ItzhakovAdditionally, converting cryptocurrencies into cash may trigger capital gains tax. Therefore, even an equal division “on paper” must account for future tax liabilities to ensure fairness in practice.
The legal system continues to adapt to technological change, but the core principle remains clear: assets accumulated during marriage belong equally to both parties, even if they exist as encrypted code in a digital wallet.
Active involvement in managing shared finances may help prevent complex, costly and prolonged disputes. In a world where money can disappear at the click of a button, both partners must stay informed and engaged.