Introduction:

On May 22, 2025, the value of a single Bitcoin exceeded $110,000 for the first time, reaching a historic high. With the significant growth of the global crypto asset market, cryptocurrencies represented by Bitcoin have increasingly become an important option for personal asset allocation for certain groups. In divorce litigation in Mainland China, how to define, identify, evaluate, and divide this new type of property rights has become a complex issue that urgently needs clarification in judicial practice.

Keywords:

Cryptocurrency; Bitcoin; Divorce Property Division

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I. Definition of Cryptocurrency and Its Legal Status in China

(1) Overview of Cryptocurrency

Cryptocurrency typically refers to a digital transaction medium or asset created, verified, and recorded through decentralized distributed ledger technology (such as blockchain) based on cryptographic principles. Typical examples include Bitcoin, Ethereum, Tether (USDT), and others.

Its main characteristics include: decentralized or distributed ledger, reliance on specific algorithms for transaction generation and verification, and transaction records featuring a certain degree of anonymity and immutability.

In most jurisdictions, the legal status of cryptocurrency is still evolving and remains uncertain.

(2) Mainland China’s Regulatory Framework and Legal Characterization of Cryptocurrency

Mainland China’s financial regulatory authorities hold a clear and cautious position regarding the legal status of cryptocurrency and related activities:

1. Denying “Currency” Attributes and Prohibiting Related Financial Business and Speculative Trading

The “Announcement on Preventing Risks from Token Issuance and Financing” issued by seven ministries including the People’s Bank of China on September 4, 2017, and the “Notice on Further Preventing and Disposing of Virtual Currency Trading Speculation Risks” jointly issued by ten ministries including the People’s Bank of China on September 24, 2021 (Yin Fa [2021] No. 237, hereinafter referred to as “Document 237”) are the main regulatory bases. The above documents clearly state:

(1) Virtual currency does not possess legal status equivalent to statutory currency and cannot and should not be used as currency in market circulation.

(2) Virtual currency exchange, virtual currency trading as a central counterparty, providing matchmaking services for virtual currency transactions, token issuance financing, and virtual currency derivatives trading all constitute illegal financial activities and are strictly prohibited and resolutely eradicated according to law. It is also illegal financial activity when overseas virtual currency exchanges provide services to Chinese residents through the internet.

(3) There are significant legal risks in participating in virtual currency investment and trading activities. Any legal persons, unincorporated organizations, or natural persons who invest in virtual currency and related derivatives in violation of public order and good morals shall have their related civil legal acts deemed invalid, and any resulting losses shall be borne by themselves.

2. Legal Status of Personal Holdings of Cryptocurrency

(1) Although regulatory policies strictly prohibit illegal financial activities and speculation related to cryptocurrency, current laws and regulations do not directly characterize the act of individuals simply holding cryptocurrency as illegal, nor have they classified it as an absolute contraband.

(2) Subject to not violating mandatory provisions of criminal laws and administrative regulations, cryptocurrency legally held by individuals is generally regarded as a specific virtual property or commodity in civil legal relationships. In judicial practice, there is a tendency to recognize and protect its property attributes and corresponding property rights under specific conditions, especially when it does not involve criminal activities such as illegal fundraising or money laundering, and does not disrupt the financial market order.

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II. Legal Basis and Feasibility of Cryptocurrency as Marital Community Property for Division

(1) Principles for Identifying Marital Community Property under the Civil Code

Article 1062 of the Civil Code of the People’s Republic of China stipulates: “The following property acquired by spouses during the marriage shall be the spouses’ community property and shall be jointly owned by the spouses: (1) wages, bonuses, and remuneration for labor services; (2) income from production, operation, and investment… other property that should belong to the community.” Meanwhile, Article 1063 of the Civil Code stipulates the scope of spouses’ personal property.

(2) Analysis of the Path for Incorporating Cryptocurrency into Marital Community Property Division

Based on the above legal provisions, the key to whether cryptocurrency can be divided as marital community property lies in whether its source and acquisition method meet the constituent requirements of community property:

1. Income from Joint Investment During the Marriage

If one or both spouses use marital community property (such as salary income, joint savings, etc.) to purchase cryptocurrency during the marriage, this conduct can essentially be regarded as an investment behavior. Regardless of whether the investment conforms to mainstream perception or carries high risks, the cryptocurrency purchased thereby and the gains generated from market fluctuations or active management (such as trading, staking, liquidity mining, etc.) have a legal basis for inclusion in the scope of marital community property.

Even if registered under one party’s name (typically referring to storage in a wallet address or trading platform account controlled by that party), it should generally be recognized as community property provided it originates from community property investment.

2. Form Transformation and Appreciation of Personal Pre-Marital Property After Marriage

(1) Pre-Marital Personal Holdings of Cryptocurrency:

Cryptocurrency legally held by one party before marriage belongs to that party’s personal property.

(2) Natural Appreciation After Marriage:

If the pre-marital cryptocurrency was not subjected to active management and operation after marriage (such as frequent trading, reinvestment, etc.), the appreciation generated from the overall market rise should generally still be recognized as natural appreciation of personal property.

(3) Returns from Active Investment and Operation After Marriage:

If one party engages in active and continuous investment management of pre-marital cryptocurrency after marriage (for example, utilizing professional knowledge for high-frequency trading, participating in new blockchain project investments, converting one cryptocurrency into multiple other cryptocurrencies and managing them, etc.), the returns generated beyond the scope of “natural appreciation” may be recognized as “income from investment” as stipulated in Article 1062, paragraph 1, item 2 of the Civil Code, thereby transforming into marital community property. The key here lies in distinguishing between “natural appreciation” and “active investment and operation returns,” with the latter often requiring the investment of time, effort, and skills.

• For example, if one party held 10 BTC before marriage and did not engage in any operations after marriage, the BTC doubled in value due to overall market growth—this appreciation belongs to natural appreciation. However, if that party used these 10 BTC to frequently conduct short-term trading after marriage and consequently additionally obtained 5 BTC or equivalent other tokens, these additionally obtained 5 BTC or tokens (after deducting possible trading costs) would more likely be viewed as returns from active investment and operation after marriage and should be included in the scope of community property.

(4) Form Transformation of Personal Property:

If pre-marital personal property (including cryptocurrency) only undergoes form transformation after marriage, such as exchanging pre-marital held Bitcoin for Ethereum at equivalent value, and no other operational investment is made or additional returns are generated, it essentially remains personal property.

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III. Practical Difficulties and Judicial Responses in Cryptocurrency Division in Divorce Litigation

Although cryptocurrency theoretically has the basis for division as marital community property, its actual division faces numerous challenges and imposes high requirements on judicial practice and case handling:

(1) Difficulties in Identification and Disclosure

1. High Concealment

The trading and storage of cryptocurrency (especially in decentralized wallets, overseas trading platforms, or through mixing services) features strong anonymity and concealment. If one party deliberately conceals it, the other party often finds it difficult to verify their holdings, quantities, and specific storage locations (such as wallet addresses).

2. Great Difficulty in Investigation and Evidence Collection

Court investigation orders have limited effectiveness in cross-border and decentralized scenarios. Traditional methods such as bank account inquiries and industrial and commercial registration inquiries are difficult to effectively reach.

3. Approaches and Evidence Guidance for Identification and Disclosure

(1) Providing Indirect Evidence Clues:

For example, suspicious large-value transfer records in bank statements related to known cryptocurrency trading platforms, screenshots of trading software or wallet applications that may exist on electronic devices (computers, phones), social media statements, chat records with others mentioning cryptocurrency investment, etc.

(2) Requiring Full Disclosure of Property from the Other Party:

In litigation, one may, in accordance with the Civil Procedure Law and related judicial interpretations, require the other party to truthfully declare all property during the marriage, including cryptocurrency, and simultaneously provide bank statements/Alipay/WeChat transaction records, etc.

(3) Applying for Court Investigation Orders:

If the other party does not cooperate in providing corresponding statements, one should attempt to apply for lawyer investigation orders to obtain them.

(4) Identifying Suspicious Transaction Patterns:

By analyzing bank statements, WeChat or Alipay transaction records, identify patterns that may be related to cryptocurrency trading, such as: frequent small-value transfers to specific individuals or platforms, large-value funds flowing to suspicious overseas accounts, or transaction records with known OTC merchants.

(5) Advocating Legal Consequences for Concealing or Transferring Marital Community Property:

If there is evidence proving that the other party has concealed or transferred cryptocurrency, or still fails to make truthful declarations after being ordered by the court, one may, in accordance with Article 1092 of the Civil Code, request that the party may receive less or no share in the division of marital community property.

(2) Complexity of Value Assessment and Benchmark Selection

1. Drastic Price Fluctuations

Cryptocurrency prices trade globally 24 hours a day, 7 days a week, and are affected by multiple factors such as market sentiment, regulatory policies, and technological developments. Tremendous rises or falls may occur within a short time, resulting in vastly different fiat currency values at different time points.

2. Lack of Official or Unified Valuation Standards

Currently, there are no officially recognized cryptocurrency valuation institutions or unified valuation methods in Mainland China.

3. Approaches for Value Assessment

(1) Prioritize Negotiation and Determine Valuation Benchmark:

If possible, it is recommended that the disputing parties reach consensus on the type and quantity of cryptocurrency, the valuation benchmark date, and reference prices.

(2) Court Discretion and Fairness Principle:

If consensus cannot be reached, one may request the court to, under the guidance of the fairness principle, comprehensively consider the specific circumstances of the case, the liquidity, realizability, acquisition cost of the cryptocurrency, and the evidence situation, and carefully determine a relatively reasonable valuation time point and reference price. In practice, some judges may refer to quotes from major trading platforms with high credibility and trading volume at specific time points, considering acquisition costs. It should be emphasized that judicial practice currently varies in its裁判尺度, especially after the issuance of Document 237, many judges, based on cautious considerations, may not rule out refusing to make value determinations.

(3) Consider Liquidation Costs and Taxes:

If compensation by offset is involved, theoretically, transaction fees that may be incurred in the liquidation process and potential tax costs should also be considered (although current domestic tax policies regarding cryptocurrency are not yet clear).

(3) Challenges in Division Methods and Enforcement

1. Feasibility and Obstacles of In-Kind Division (“Token Splitting”)

(1) Technical Feasibility:

It is technically feasible to transfer a specific quantity of cryptocurrency from one party’s wallet address to another’s.

(2) Main Obstacles:

• Cooperation Difficulties:

If the holding party does not cooperate, it is difficult for the court to enforce “token splitting.” Since private keys are controlled by individuals, or cryptocurrency is stored in overseas exchanges or decentralized wallets, the court’s enforcement measures are limited.

• Receiving and Management Capability:

The receiving party also needs to possess corresponding technical knowledge and wallet tools to safely receive and manage cryptocurrency.

• Compliance Risks:

Court orders directly transferring specific cryptocurrency may indirectly touch upon the prohibitive provisions of Document 237 regarding virtual currency-related business activities. However, some cases have already supported this. For example, in the civil judgment of Shanghai Minhang District People’s Court (2022) Shanghai 0112 Min Chu No. 43490, the court ordered the defendant to directly return DOGE coins… SOL coins, ETH coins, BTC coins, etc., to the plaintiff. Similarly, as mentioned above, this does not represent all courts’ judicial viewpoints and can only serve as a reference.

2. Possibility of Compensation by Offset and Compliance Considerations

(1) Possibility of Compensation by Offset:

After identifying the types and quantities of cryptocurrency and determining their fiat currency value, ordering the holding party to pay corresponding fiat currency to the other party as compensation can avoid compliance risks and enforcement difficulties that may arise from directly disposing of cryptocurrency. For example, in the civil judgment of Shanghai Pudong New Area People’s Court (2024) Shanghai 0115 Min Chu No. 45503, the court, based on “the Bitcoin market conditions of the month and the USD to RMB exchange rate and other factors,” discretionarily determined the price for compensation for the disputed Bitcoin and ruled that “the defendant return 0.25 BTC to the plaintiff, or if cannot be returned, compensate the plaintiff RMB 116,190.” Of course, there are also opposing judicial viewpoints in practice, which depend on the region and the specific handling judge.

(2) Compliance Considerations:

Courts directly ordering forced sale and liquidation of cryptocurrency on the secondary market, or confirming the value of cryptocurrency according to market value and then dividing the proceeds, may potentially conflict with the provisions of Document 237 regarding prohibiting virtual currency exchange and related businesses. Therefore, courts generally maintain cautious attitudes towards this. However, if the parties unanimously agree to voluntarily sell and divide the proceeds, and this does not violate legal prohibitions, the court may respect such agreement. In the civil judgment rendered by Shanghai No.1 Intermediate People’s Court on May 6, 2020, (2019) Shanghai 01 Min Zhong No. 13689, the court determined the compensation amount per Bitcoin based on the consensus of the litigation parties.

From the perspective of judicial practice, the parties reaching consensus on determining the value of cryptocurrency is evidently a more stable option for judges.

(4) Judicial Caution and Evidence Requirements

1. Cautious Attitude and Risk Prevention

Given the state’s severe crackdown on virtual currency trading speculation and potential financial risks (such as money laundering, illegal fundraising, etc.), courts generally adopt a more cautious attitude when handling such cases. They will focus on examining the legality of funding sources and whether illegal financial activities or criminal conduct are involved. If a crime is suspected, the proceedings should be suspended and clues transferred to investigative authorities.

2. Strengthened Burden of Proof

The party claiming division of cryptocurrency bears a heavier burden of proof, not only needing to prove the existence and quantity of the cryptocurrency and that it was acquired during the marriage (or meets other circumstances requiring division as community property), but also needing to provide preliminary evidence confirming the value of the cryptocurrency, and as much as possible provide clues for identifying the other party’s holdings.

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IV. Core Considerations in Practical Handling

1. Objective Risk Assessment and Reasonable Expectations

Handling such cases requires fully recognizing the legal uncertainties, regulatory policy risks, drastic value fluctuation risks, extreme difficulties in investigation and evidence collection, complex value assessment, and significant enforcement uncertainties faced by cryptocurrency division, and adjusting expectations accordingly.

2. Early Evidence Collection and Preservation

(1) It is crucial to collect and preserve various indirect and direct evidence of the other party’s holdings and trading of cryptocurrency as early as possible and comprehensively, including but not limited to: bank transfer records (especially funds flowing overseas or to suspicious personal accounts), trading platform account information (screenshots, email notifications), wallet addresses (if obtainable), cold wallet hardware, chat records (WeChat, QQ, Telegram, etc.), emails, cloud storage files, audio and video recordings of the other party’s statements, social media updates, etc.

(2) For large-value fund transactions, focus on verifying their ultimate destination.

3. Priority of Negotiation and Mediation

Given the many uncertainties and enforcement difficulties in judicial practice regarding cryptocurrency division, promoting the parties to reach a settlement agreement on the identification, quantity, valuation, and division plan of cryptocurrency through negotiation or mediation is generally an efficient and low-risk strategy. The agreement content should be specific and clear, and operable. For example, in case No. (2021) Beijing 0102 Min Chu No. 35486 of Beijing Xicheng District People’s Court, the court, based on the agreement in the property distribution agreement signed by both parties that “digital currency has a current value of 2.4 million yuan, half for each person,” supported the plaintiff’s claim requiring the defendant to pay 1.2 million yuan according to the agreement.

4. Determination of Litigation Claims and Trial Preparation

(1) The determination of litigation claims should be carefully conducted based on the extent of evidence mastered and the specific circumstances of the case. If evidence is relatively sufficient, one may claim that cryptocurrency is marital community property and request proportional division or compensation by offset.

(2) If it is difficult to accurately identify the quantity or assess the value, or the enforcement risk is too high, one may consider taking the general overview of the other party’s cryptocurrency holdings as a reference factor for their economic capability, and strive for a more favorable division proportion or compensation for one party when dividing other definite marital community property.

(3) In trial, one should make good use of questioning techniques to strive for the other party to disclose or admit relevant facts in their trial statements.

5. Review of Legality of Funding Sources

Reviewing whether the funding source of the cryptocurrency involved is lawful is a necessary step to avoid handling assets that may be derived from illegal activities such as illegal fundraising, online gambling, money laundering, etc., and to prevent potential risks.

6. Application of Property Preservation (Cautious Assessment)

If there are clear clues pointing to other traditional property in the other party’s name available for preservation (such as bank deposits, real estate, vehicles, etc.), and there is preliminary evidence proving that the other party may transfer or conceal marital community property including cryptocurrency, when statutory conditions are met, one may consider applying for property preservation before or during the litigation to ensure the smooth enforcement of the judgment. However, directly preserving cryptocurrency itself is extremely difficult in practice.

Given the rapid technological iteration in the cryptocurrency field and the continuous development and change of regulatory policies and judicial practice, it is important to continuously pay attention to the latest developments in related technologies, regulatory policies, and judicial practice.

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Acknowledgment: Intern Peng Siying also contributed to this article.