Stephanie Tang | Cryptocurrency & Family Law

As cryptocurrency becomes widespread, it’s becoming an issue in family law cases.

But many lawyers lack an understanding of cryptocurrency and how it can affect division of property in divorce cases. 

Baylor University Law Professor Stephanie Tang is here to break down the basics of cryptocurrency and discuss how the world of family law has adapted to the growth of digital currency. 

We’ll cover:

  • What is the blockchain?
  • How does mining work?
  • What are NFTs—and how are they valued?
  • Best practices for cryptocurrency & division of property
  • And more

Mentioned in this episode:


Stephanie Tang: Because it’s so volatile and so increasingly changing now my recommendation is to value and divide cryptocurrency aside from the rest of the marital estate. So don’t try to do an offset by saying like, I have $10,000 in crypto and so we’ll give you $10,000 in something else, another asset instead. Because you’ll end up with a disproportionate split.

Voiceover: You’re listening to the Texas Family Law Insiders podcast, your source for the latest news and trends in family law in the state of Texas. Now, here’s your host attorney Holly Draper.

Holly Draper: Today we’re excited to welcome Stephanie Tang to the Texas Family Law Insiders podcast. Professor Tang is an assistant professor of law at Baylor Law School where she teaches basic and advanced family law. Before joining Baylor, Professor Tang was a partner at a family law firm in Chicago, where she specialized in all areas of family law. She obtained multiple certifications as a mediator, fellow with Collaborative Divorce Illinois, and a Certified Financial Litigator with the American Academy for Certified Financial Litigators. Professor Tang is the current Chair of the Illinois State Bar Association Family Law Section Council. Thank you so much for joining us today.

Stephanie: Thank you for having me.

Holly: So why don’t you tell us a little bit about your background?

Stephanie: Sure. So you pretty much summarized it. But outside of what you had already said, I went to Northwestern University for undergrad and first became interested in a career in family law through an internship that I took in one of my summers there as an intake coordinator for a legal aid organization in Chicago. I worked at the divorce Help Desk specifically. And through that experience, I was able to talk to clients and more importantly, see how attorneys could make a difference in people’s lives and what’s often a very emotionally difficult as you know, time.

Which really helped kind of play into my psychology background and really marry the psychology background with the legal practice. Then, transitioning into my law school time at the University of Illinois in Champaign, Illinois, I extra and for three different family law judges and was a summer associate at the family law firm I ended up working for after I graduated in the first couple of years. And those experiences helped me see how much judicial discretion there is in family law. And really how important it is to be able to make those creative arguments based on a particular family circumstance.

As you know, we have a lot of what people might say fluffy, the legal standards are very broad discretionary legal standards, like best interests of the child, a lot of factor analysis, and it’s not a rote procedural process as some other areas of law might be. Where you really have to take the time to interview and get to know your clients on that more personal level to best advocate for them. And that was really what got me interested in the field of family law in general.

Holly: So I think it’s interesting that you move from practicing family law in another state to teaching family law in Texas, because we think of family law is one of those things that can be very state specific. How has that transition been, of going from one state to another in that practice area?

Stephanie: Sure. I think that’s a really important question. And I think that within my especially in my basic family law course, one of the things I’m really emphasizing to students is to understand why the laws in Texas and in family law in particular differ from family law across other states. And why there are so many kinds of cross-jurisdictional issues, disputes, and why people choose to come to Texas or choose to not come litigate their divorce cases in Texas. So part of that is I asked my students to choose a jurisdiction outside of Texas and look at how they analyze spousal maintenance claims, child support claims, property division and custody or as in Texas we call conservatorship claims.

And then we come in we compare that to the Texas way. We look at sample clients hypotheticals and say, under these circumstances, would a client be more likely to want to litigate their case in Texas or in another state. And really being able to examine how those the different models impact a family’s financial livelihood impact the livelihood of their children, I think it’s really valuable and important for future practitioners to be able to articulate and understand. Here’s why the statutes make a difference and these nuances in the way that we calculate or look at different factors can make a difference.

For example, if fault is determinative in property division in one state versus another, or if parenting time is considered in child support in one state or another. Why does that matter? Instead of just kind of rote memorizing what the statute says. Really understanding the reason or how this could impact the analysis in a particular case. One of the not probably not as liked exercises that I have students do is to calculate child support under the percentage of income model that Texas uses versus the income shares model that other states use. And look at how, looking at both parents’ income and looking at how parenting time impacts child support can make a large difference on how child support is calculated.

But I think it really helps even though the students don’t like doing math, they, I think it really helps hit home in terms of why these statutes and how they’re crafted make a difference in people’s lives. And how they what access to resources and finances that they have following a divorce case. So that’s how I’ve been integrating my practice from Chicago and in my family law practice there, too, moving to Texas.

Holly: So before we dive into our main topic today, can you share with us a little bit about what your transition from being a family law practitioner to being in academia was like?

Stephanie: Sure. So aside from being able to connect with clients, I think I’ve always enjoyed the research and analysis aspects of family law. I’ve been writing the state statute and case law surveys for Illinois for family law since 2017. And I’ve really enjoyed analyzing and seeing how the laws developed. I’ve also been on the Family Law Section Council, as you mentioned, for the Illinois State Bar since 2017, as well. And as part of that I’ve helped to draft and work on legislation. So drafting those surveys, and then working on the Bar Association, along with developing and presenting CLE programs outside of my practice, really helped ground and grow my interest in teaching family law.

And so the opportunity first arose as an adjunct professor to teach at Loyola University Chicago School of Law. And I took it while I was still in private practice. So I was doing private practice nine to five, I guess, and then teaching Wednesday nights. And then as you know, going home and then doing private practice from five until whatever time was required of me to. But the time that I had it as an adjunct really grounded my passion for teaching in an academic law school setting.

And so when I had the opportunity to marry that adjunct teaching experience with running the Family Law Program at here at Baylor law school, I jumped at it pretty much that this is basically my dream job. So I’ve been really excited to be able to get more, learn more about the more recent trends. I think learning the history of the statutes is really important, like I said. And I think that’s fairly universal across the board, but something that I am really trying to integrate into my teaching, as well as making sure that I stay current on the most recent cases.

Not only in Texas, but again across other states to to see what are the unique ways that these these very historical concepts are being analyzed and interpreted. Especially in family law by judges who have such wide discretion in areas like extended families, and multi-generational households or with functional or psychological parents, and now with surrogacy and assisted reproductive technology. So really looking at that expanded family and how these traditional statutes that contemplate a two-parent and children household have been morphed and transformed over the past few decades is really been very exciting for me.

Holly: So what we’re going to talk about today is a topic that I think is relatively new for family lawyers to have to deal with. It’s certainly something that I know, not a whole lot about. And I suspect that I am not alone in the family law realm of not knowing too much about this topic. And that is cryptocurrency. So what is cryptocurrency?

Stephanie: Sure. So cryptocurrency is a type of decentralized virtual currency. And so by decentralized I mean, it doesn’t require a third-party intermediary to store or approve transactions like a traditional bank. So think about when you’re banking at Citibank, or Wells Fargo, or whatever, you have someone who’s approving your transaction saying you have the amount of money to transact with to make this purchase. And you have to have that third-party approval. In cryptocurrency it’s decentralized, so there is no kind of central third party authorizing those transactions.

Holly: So why is it important for family lawyers to understand it?

Stephanie: So it’s becoming increasingly more popular, whether it’s just people who are dabbling in it because they see it in the news or actually active investors in it. Without understanding cryptocurrency, it’s difficult to know what you’re looking for within discovery, whether it’s something you get through a Texas Rule 194 disclosure or the kind of equivalent in another state. Even despite, you might have seen the cryptocurrency market crashing this year alongside the traditional markets as well. Investors speculate that the crash is likely, hopefully, coming to an end and should kind of stabilize and increase backup in the next year hopefully.

Holly: So with our dollars, those are backed by gold. And it sounds like to me crypto is essentially completely fictional. And it’s not backed up by anything. Am I wrong in that?

Stephanie: So it’s a little bit. So we have, cryptocurrency is traditionally mined. And so I don’t want to get too technical in that process, but it is backed by what’s called a blockchain and this blockchain technology. So there is, blockchain acts as a ledger that records who made the transaction and to whom and what the amount is. So there is that kind of the familiar type of ledger that you have with the traditional currency, and that blockchain or ledger is publicly accessible and verifiable by anyone who’s transacting in that network.

Holly: Okay, so speaking about blockchain, what exactly is it?

Stephanie: Sure. So I think this is best explained by an example. So I’ll give you an example using Bitcoin, which is kind of the most well-known original form of cryptocurrency. So before I give you the example, I think it’d be helpful to go over some terminology. First, all cryptocurrency users have what’s called a virtual wallet that has its own virtual wallet address. This is pseudonymous. So think of it as like a user name. So you could be puppyhugs28, or anything you want. Basically, any kind of user name, it doesn’t have to have your name in any capacity in it. So that’s the virtual wallet address. Now each user will also have a public key and a private key. I’m trying to equate these to more well-known concepts.

So a public key is an address that everyone in the network knows. This is basically like a very long email address. So imagine your email instead of being [email protected], it’s a 33 to 34 character address. But similarly, this is something that everyone knows you can, everyone has kind of that access to your public key. The private key, on the other hand, is a unique address that only the user has knowledge of, like a password. So in order to access the funds, you need to have that private key just like you any time you’re logging into your bank, your credit card, any account that you have, you have to have a password. So that’s the equivalent of a private key.

So say, we’ve got Abby and Bert. I have a almost three year old, so very into Sesame Street. So those are just, I always use Abby and Bert. You can kind of ask my students or some variation of a Sesame Street character. So say Abby has 10 Bitcoin, right, and she wants to transfer 10 Bitcoin to Bert. So to do so she’ll need to have Bert’s virtual wallet address. Remember, this is like his username. So for those of you who use Venmo, or cash app, or some equivalent, you’re familiar with using usernames for transferring money, right? You’ve got, someone makes up a username, can or doesn’t have to have your name in it again.

So Abby will send those 10 Bitcoin to Bert’s virtual wallet address. And this transaction will be encrypted through an encryption algorithm using Abby’s private key to digitally sign the transaction. So again, the private key remember is like a password. So this basically saying, when you log into your bank account, and you want to transfer money to someone else, you gotta log in with your password to make sure that you are, you’re the one who’s authorizing this transaction. So she uses this private, her private key to digitally sign the transaction, and verify that she’s the one who’s making it.

The transaction is then transmitted to users on the Bitcoin network using Abby’s public key for approval. So this is like, again, the public key is like your email address. So now, no one has access to your private key, they just kind of see like your public key is trying to send 10 Bitcoin to Bert. So the users will see Abby’s public key and they will see whether Abby has the sufficient funds to actually transmit 10 Bitcoin to Bert. If she doesn’t, the transaction will fail because the other Bitcoin network users will have copies of that blockchain ledger showing she doesn’t have sufficient Bitcoin and will flag the transaction as invalid.

So say Abby only has nine Bitcoin and the other users on the Bitcoin network are like, well, she doesn’t have 10 Bitcoin. So she doesn’t have 10 to Bitcoin to transfer, so they’ll flag the transaction and it will be invalidated and not added to the blockchain. So say she does have 10 Bitcoin, which is usually the case. And as long as she has the Bitcoins to transfer, the nodes on the Bitcoin network will reach a consensus and the transaction will be added as a quote-unquote block to the Bitcoin Blockchain. So again, this is like a ledger. So imagine it as kind of each individual transaction is a block on the chain, hence the name blockchain.

So now, in order for Bert to get the funds or to access the funds, he has to decrypt this transaction using his private key. So again, just like the bank account, or traditional transaction, you have Bert logging into his bank account, saying, I am Bert, this is my password that only he has access to. So he will then be able to decrypt the transaction using his private key and then he will be able to access those 10 Bitcoins. So the only thing that the public, the network sees is the public key and the kind of amounts verifying that Abby has the funds to transfer to Bert.

And then the people who have access to the funds are Abby on one side and Bert on the other. So unlike, as I said, unlike a traditional transaction where you have the bank as a third-party intermediary who’s approving the transaction, here, it’s kind of every user on the Bitcoin network in this particular example, using Bitcoin as our example coin here, who is verifying it. So from their respective I guess devices. So that’s, that’s blockchain hopefully, is a kind of example.

Holly: So random people who own Bitcoin can just pop in and see oh, this transaction should or should not be happening. It seems like that just doesn’t seem like a good system me. Like there should be somebody designated to be checking, and not just anybody can do it.

Stephanie: So I think there has to be consensus amongst the nodes, and I think that is the probably the barrier to and some of the pushback in terms of the decentralized regulation of cryptocurrency in general. I think there’s a lot of issues with SEC regulation of cryptocurrency, generally, because there isn’t a centralized regulatory authority for cryptocurrency. So I think you’re hitting the nail on the head in terms of the criticisms that the SEC also has with the with cryptocurrency generally, in terms of lacking a centralized regulatory authority.

And also kind of the IRS generally having issues with taxation. And as you said, this is a relatively new concept. We’re talking about kind of in just in this last decade or so where we’re really seeing the use of cryptocurrency surge, and really probably in the last like six years. And so it’s a very volatile and increase in there. And there have been a lot of increased regulations and recognition of this. I think there was it was slow to up tick in terms of saying like, maybe this will just go away, this seems like a fad. It’s not really here to stay.

And just recently, the Department of Justice has developed their own cryptocurrency team in 2021, I believe, or at least in the last couple of years. The SEC is now increasingly looking at at the IRS just adopted on their 1040 form a line for identifying virtual currency. So you’re right, I think there’s been a lot of speculation or why is it that we have this kind of decentralized currency option? And it hasn’t seemed like it’s going away yet.

And that’s why all these kinds of federal agencies and organizations have been now taking to adopting additional standards regulation. So I think over the upcoming years, I think you’re right that you’ll there’ll be more regulation to try to have something like you’re talking about. An make it more akin to the traditional account that you have some kind of central regulatory authority.

Holly: So backing up to the first part with the virtual wallet.

Stephanie: Sure.

Holly: Is the virtual wallet. Is there one virtual wallet that can contain every type of cryptocurrency out there? Or is there you know, this is your virtual wallet for Bitcoin? This is your virtual wallet for whatever other crypto there is, I’m not familiar with, but.

Stephanie: No, yeah, that’s a good question. So no, you need a different wallet for each type of cryptocurrency. And you can have multiple wallets with the same type of cryptocurrency, which is, kind of gets into how people get around to try to hide it. So you can have a wallet for Bitcoin, a wallet for Ethereum. I’ll use different kinds of coins, a wallet for Ethereum. And then the each of those has their own unique wallet addresses.

And so I’m skipping ahead a little bit, but one of those things that you could look at when you’re looking at the transaction is, when you’re looking at the transaction history does this user who’s only disclosed one wallet address, keep sending money to the same wallet address? It’s very similar to when you’re looking at like someone’s Venmo, or Amazon purchases or something. Is there a repeated person who’s receiving funds from them? And who is this person?

And so is this, this might be a potential indicator that they have a second wallet address that they’re using to funnel funds into, and they’re trying to hide behind it and not disclose it and discovery. So very much like in the traditional divorce cases, where you’re looking at, is there an account number that hasn’t been disclosed, but that keeps getting like $100 a month that they’re trying to hide amongst 1000s of transactions? You can look and see like, is there that repeated wallet address that keeps getting money sent to it, or transferred to it on a regular basis? And then flag that at to ask during a deposition or a trial or what have you.

Holly: So I know you mentioned at some point about mining.

Stephanie: Yes.

Holly: And I saw there was a new story the other day on TV and my husband and I were watching it and they showed this piece of land with tents put up and they were like Bitcoin mining or crypto mining is coming to this town near us. We looked at each other and we’re like what in the world? What exactly is mining? And how, can you explain that a little bit?

Stephanie: Sure. So, Bitcoin miners, they, I’ll try to kind of put it in a less technical terminology. They, essentially Bitcoin miners try to compete to solve an extremely complex math problem that requires the use of very expensive, very energy-intensive computers. And so I think that’s one of the biggest things that comes up in the news is that they try to find these areas, and they use them as hubs for these like large energy-intensive hubs or networks.

So to complete the mining process, a miner has to first arrive at the correct or the closest answer to the question. The process for guessing the correct number is known as a proof of work. The miners then guess the correct number by making as many guesses as quickly as they can. So it’s really just like a competition. They’re running the algorithm trying to guess the answer as quickly as they can. And that requires, again, a lot of energy.

So the issue here is that there’s a limited amount of coins available to mine. And so once they mine it then that it’s added as a block again to the blockchain, and they’ll receive a number of bitcoins if they’re able to successfully add a block to the blockchain. So, we, there’s mining rewards for mining Bitcoin, and adding new, but it’s becoming increasingly more difficult as the kind of scarcity of Bitcoin increases.

Holly: So with the virtual wallet, is that something that’s stored out there in the cloud? I know somebody had raised concerns to me about it being stored actually on a hard drive. And then what happens to that hard drive if it crashes? Where exactly is it getting stored?

Stephanie: Sure. So unfortunately, the short answer to that is that also depends. So there are two main types of wallets. There’s custodial wallets, which are hosted by third parties that store your keys for you, or in noncustodial wallets in which you take the responsibility for storing your public and private key. And then within each of those, there’s kind of three subcategories of those wallets as well. So there’s software wallets, hardware wallets, and paper wallets. And this is, this kind of goes to what is more familiar.

So each of these types of wallets can be considered either a hot wallet, which means they have a connection to the Internet, or a cold wallet, which has no connection. So for a software wallet, the answer to your question is yes. These include applications for desktops and mobile devices that are installed on your desktop or laptop computer. So there is something kind of stored on your computer. For a hardware wallet, that’s kind of what you’re talking about with this external hardware device.

So these are a couple $1,000. And they’re the most popular because you can kind of store your private keys and remove them from your device for increased security. This is similar to a USB drive, but they actually have additional security as well. The final subcategory which has kind of fallen out of favor is the paper wallet, which sounds like it is. You write your public key or private key down on a piece of paper or use a QR code or, and you store it in a safe and I obviously like that’s very difficult unless you have a very secure safe. So that’s probably the least secure of those options.

So to answer your question regarding your kind of hardware wallet or the paper wallet that is again, it’s stored out externally from your computer. If you lose it, you’re kind of out of luck. So there’s one story that keeps kind of coming up where there was a Welsh man who threw out a hard drive in 2013. And the hard drive had about 8000 Bitcoin, which would be worth over $150, $180 million. Even after the recent cryptocurrency crash. So earlier this year, he tried to present an $11 million proposal to locate the hard drive amongst 100,000, more than 100,000 tons of garbage.

So, to answer your question, it can be very difficult if you only have it stored as the hardware as a hardware wallet, and then you lose that external drive, you’re kind of out of luck. You’re proposing to the city to try to go through the landfill at that point, to try to get back your over $100 million if you happen to have that much Bitcoin. A lot of the times if you don’t have it, in a little less extreme example, not worth trying to dig through the landfill, at least. But yes, in those circumstances, then you would not have the ability to kind of recover those funds.

Holly: I was really hoping that the answer was going to be different than that because my husband apparently bought Bitcoin way back in the beginning and it’s on some computer that is no more and I was thinking there’s got to be a way to get that. But I mean, that seems crazy to me that hardware that can crash at any moment. If it’s gone, it’s gone.

Stephanie: Yeah, so I think there’s a couple of things there too, within the that’s why a lot of people who have those like public keys, private keys, they have to store them in multiple areas. So I have a couple friends who I know who invest they have it in a safe at their parents house, they have it in a safe at their house so that they can still kind of access those. If you lose your private key, there’s a backup mechanism built into the crypto wallet that uses 12 to 24 random words.

So that can be like donkey, pony, lizard, house. Like, but if you lose that secret phrase, again, you’re kind of out of luck if you don’t have those. But again, people go through great lengths because of these concerns to try to backup their keys in kind of other locations, alternative places so that they can still access those funds in some in some capacity later on if they lose, if they lose them.

Voiceover: This episode of the Texas Family Law Insiders podcast is sponsored by the Draper Law Firm, providing family law appellate representation across Texas. For more information, visit or call 469-715-6801.

Holly: So what types of discovery should attorneys be thinking about when we’re talking about virtual wallets or crypto?

Stephanie: Sure. So a lot of the times people will think that cryptocurrency is like a hole. They don’t want to touch it right. they’re like I am confused by this entire concept. I don’t think that we can use what we traditionally use. And I disagree with that notion. I think that cryptocurrency it’s been ruled as the equivalent to a cash equivalent. And so I think you can use some of the traditional discovery methods that you have in in the traditional divorce case. So the first is using a preservation letter. So the best practice is to send that preservation letter which puts the other side on notice that they shouldn’t dispose of or otherwise conceal the information related to cryptocurrency.

Of course, as you and I both know from our practice, this often has limited utility, but at least we’ve preserved a future spoliation of evidence claim potentially. And it’s kind of malpractice, if we didn’t send that kind of letter. Of course, that could also put spouses on notice that they could try to dispose of these assets. And so you have to kind of be careful and talk to your clients about the cost and benefits of doing so. And then traditionally, with our request for production or interrogatories, again, although cryptocurrency has been classified as a cash equivilant in other cases, I don’t think cryptocurrency investor traditionally don’t think of a cryptocurrency as falling under a cash account.

So if they’re listing out their bank accounts, they’re not also going to list their cryptocurrency accounts as well. Also, it’s not like it’s held at, again, centralized institution in the same way that you’re disclosing a like Wells Fargo account. So I think it’s important to make sure that your request for production and interrogatories do you have specific requests and interrogatories that ask for information on cryptocurrency, specifically.

So and virtual currency specifically so that you are kind of making sure you exercise your due diligence in your divorce cases to make sure that if later on you discover that there is virtual currency, the other spouse can’t say well, you never asked for it. So you do want to make sure that you have something at least encompassing virtual currency within your request for production or interrogatories.

Holly: So I kind of skipped past something I meant to chat about before we got to discovery. So we’ll back up a little bit. Can you tell us what are NFTs?

Stephanie: Sure. So NFT’s are non-fungible tokens. And they’re traditionally, if you’re looking at kind of what the definition of non-fungible is, I think it’s important to kind of understand that because I think people are like, what does non-fungible mean? So say like, $1 bill, going back to your kind of traditional currency. A $1 bill is fungible, you can exchange your $1 bill for your friend’s dollar bill. And that’s kind of the concept of fungibility. On an NFT, on the other hand is non-fungible, so like a rare painting like the Mona Lisa, it’s non-fungible, you can’t exchange that for another painting.

So NFTs are a unique digital representation of art or other collectibles. So this can be a tweet, virtual trading card, it could be your kid’s artwork. A couple of news stories from last year where I took my grandson’s artwork and made them into an NFT as a gift. They are primarily secured again by blockchain technology. They’re secured by traditionally the Ethereum blockchain, which is another popular type of cryptocurrency and they can either be created or purchased through an NFT marketplace.

Holly: So why might a business create an NFT?

Stephanie: Sure. So an NFT will help, can help raise capital and increase interest in a company especially these newer companies. Some NFT’s provide for perks associated with ownership. So that can include concert tickets, or other event tickets, conference tickets, which, in turn can generate additional revenues for that particular company. It can also again, like help keep the company first in mind. In terms of like, here this is like, even if it’s like this kind of silly thing like the NBA has, there’s the NBA, Topshop NFT. That has kind of playing cards of basketball players. So even something like that you’re like, okay, at least this is increasing interest in this and hopefully you can like keeping it top of mind generating revenues for the business in general.

Holly: So how do you value an NFT in divorce?

Stephanie: Sure. So unfortunately, valuing an NFT is kind of like valuing cryptocurrency in terms of its, it’s very volatile. And I want to kind of emphasize also that purchasing an NFT doesn’t confer ownership rights to the subsequent buyer, but they just acquire the limited rights to display the NFT and then resell it. So traditionally, in a divorce setting, you’re looking at dividing the kind of proceeds from a sale of an NFT. So in order to determine, I think that’s probably the most traditional way, so to figure out that listing price or the value price, you’re trying to find an appraisal mechanism.

So they do have NFT appraisals now. They vary in terms of their a lot of them are relatively new so have not been like very peer tested, court-tested particularly. So I’m not able to really speculate on how a court might accept an NFT appraisal. Otherwise, you can get a general idea with what the NFT might be worth by using NFT databases like rarity tools. So rarity tools is just like your traditional website where you’re looking up any kind of valuable collectible. And you can filter by character characteristics, so you can approximate the value.

So say, One popular NFT is crypto kitties, which is what it sounds like. It’s a bunch of different kitties that have different facial expressions, hats, outfits, things like that. So you can filter by those types of characteristics and determine for your particular NFT. What similar NFTs with similar characteristics might be on the market for.

So that being said, very much like in a traditional divorce where you don’t want to condition the disposition of another asset on the sale of your marital residence or something that could be difficult to sell or you don’t know whether it’s going to be quick to sell. You don’t want to condition the disposition of another asset on a sale out of an NFT either. So an NFT can take a long time to sell. Could really just sit on the marketplace for a long time. And since they’re so subjective, in terms of aesthetics, particularly they may not be purchased kind of anytime soon, you might have a kind of there’s also the bored ape yacht club, you might have kind of an ugly ape that no one really likes or kind of a dejected kitty.

So even though they might be rare, they might say like we don’t really want that NFT and so you want to make sure that you look at the NFT value kind of separate from the rest of the marital estate or the community estate depending on what kind of jurisdiction or what the property division model of the state that you’re in follows. Another thing in terms of valuation that I wanted to mention quickly also is that NFT creators, so people who create their own NFTs also might receive royalties from future sales of their NFT.

So you’ll want to look at that, and keep that in mind for a potential income stream. And that kind of gets more into the weeds in terms of the financial support or domestic support obligations to another spouse. But I at least wanted to quickly mention that that also might be a consideration to look at as well, if you are talking about someone who’s created their own NFT.

Holly: So are NFTs typically valuable enough to make it worth going through this exercise?

Stephanie: Sure. So it depends. I think, some NFTs have been very valuable, the highest, the most kind of most used example is in March of 2021, Christie’s Auction House held an auction, where they sold one NFT for $69 million. Again, this is speculated to crashed a lot this year, but speculated to rebound. So it’s hard to kind of determine and I think that’s why investors find it’s so interesting to invest in because it has this high upside potential. But it also a lot of them are not worth anything.

So it’s hard to kind of answer that question, I think, but I will say that Sotheby’s and Christie’s both have adopted NFT sales in their auctions. So again, it has become increasingly popular in terms of something that even these large, very well-known entities are selling. So it’s not just like, these are just people on the internet selling their stuff on eBay, even though that is, you know, it can also be very varied in terms of value. But it does have some backing by very well-established institutions, too.

Holly: So if I buy, you know, multimillion-dollar NFT, what do I do with it? I just look at it on my computer screen, or I put it on my website? I mean?

Stephanie: So you can display it, there’s, well, there’s now a virtual real estate that you can buy, you can display the NFT in kind of the virtual communities as well. So yeah.

Holly: Wow, is virtual real estate expensive?

Stephanie: Virtual real estate is expensive, a lot of celebrities are starting to buy virtual real estate as well. And companies are starting to buy virtual real estate spaces as well. And so part of that is just kind of part of this creation of a new virtual community that’s kind of outside of the in-person realm that we’ve been accelerated into in the last couple of years.

Holly: Interesting. Okay. So, circling back to the discovery topic. What are some signs of cryptocurrency, or crypto transactions that we should be looking for when we’re looking at, you know, traditional bank records or anything like that? What might be a red flag for us?

Stephanie: Sure. So a couple things. For the tax returns, as I said, as of 2021, there is now a line that’s kind of at the top of the 1040 that asks if a spouse has transaction in virtual currency. So that’s where I would look first. I guess it’s at the top of the form, but it’s not super obvious. So I just make sure that that if that box is checked, that’s like red flag one. Within that you can also look at whether there’s capital gains recordings on tax returns from the transactions in cryptocurrency.

So that’s kind of the traditional tax return route. In terms of bank records, a lot of businesses now accept cryptocurrency as well. So you can also see whether there are like businesses that regularly accept cryptocurrency and whether there’s transactions made from or to cryptocurrency exchanges like Coinbase, to see whether they might have cryptocurrency. So look for those kinds of cryptocurrency exchanges on those bank account statements.

Also, looking at the traditional virtual payment apps that are becoming more and more popular, so Venmo, Cash App, they both have cryptocurrency options. So also looking to see whether there’s any kind of cryptocurrency within the transaction records you might get from Venmo or Cash App or one of those kinds of virtual currency applications as well.

Holly: So let’s say we’re getting to the property division part of our divorce case and we have crypto involved. Can you go through the steps of how we’re going to factor in crypto when we’re dividing property?

Stephanie: Sure. So as I said, I think there’s you still go through the traditional stuff. So now that we’ve done the identification of the crypto we found that it exists, I think you still need to look at those other three steps that you take in any traditional divorce case. So the characterization, the valuation and the division. So in terms of characterizing, again depending on what state you’re in, assuming you’re in one of the states that separates marital property from separate or community property from separate, you first want to see how active of an investor are they.

So if you are able to obtain their virtual wallet address, there’s something called a blockchain explorer where you can type in that wallet address. If you see like, they transacted like one time, it’s probably not worth hiring an expert for that, right? You can look, you can say, okay, they’ve got one transaction, you can kind of tell what the source of that is, you can tell it’s community property, or it’s separate property funds. And it’s like very easy to trace. Whereas if you look up their wallet address, and there’s hundreds of transactions, now you’ve got an opportunity, where you’re saying that, again, going back to the traditional divorce case analysis, do we need to hire an expert here?

And most likely, the answer in that case is going to be yes. Because now it’s very difficult to figure out and trace those transactions. So, in looking for an expert, I would say, my recommendation is find someone who not only has an expertise in valuation and intricacies of virtual currency, but also valuation of assets in divorce generally. Because you still need to be able to have again, that expertise in divorce asset valuation, understand the considerations there. Understand the classification and characterization concerns there.

But you also need to have the virtual currency expertise. But I think a lot of times, because people are trying to kind of specialize in virtual currency valuation, they’ll just say like, I’m a virtual currency valuation expert. And if ask them if they have any idea how property is characterized in a divorce, they’re like, no, but I’ll figure it out. So that is not ideal. You want to have someone who knows something about both. I think the next step after characterization is again, looking at the valuation. So we talked a little bit about how you would value an NFT.

In terms of valuation of a cryptocurrency, like of a type of cryptocurrency or a particular coin, websites, like coin market cap have real-time average prices per coin. So the best practice is because unlike the traditional stock exchange, there’s no opening or closing of market time. So value is changing at all times of day. So when you’re, whereas you could in a traditional situation where you’re dividing stock, you could just say it’ll be valued as a close of market on XYZ business day. You want to actually designate a time evaluation, in addition to the date of valuation. I think that’s really important and can make a big difference in terms of evaluation.

I think, in terms of looking at cryptocurrency and divorce in general, just making sure you’re aware of that large volatility and value and talking to opposing counsel and articulating to a judge like, this is why it’s important for us to have a particular time in place. Otherwise, we’re going to have a lot of issues. And coin market cap, and other websites do you have the ability where you can at least like look at a particular time and track like what the value was at a particular time. So it’s not like you have to sit at your computer and wait for like 4:59 to turn into 5 o’clock and say like, okay, here’s the value as of this time.

You can, there’s a look back option as well. And then finally, in terms of division, so as I said, I think because it’s so volatile, and so increasingly changing now, my recommendation is to value and divide cryptocurrency aside from the rest of the marital estate. So don’t try to do the offset by saying like, you’ll get this. I have $10,000 in crypto and so we’ll give you $10,000 in something else and other asset instead because you’ll end up with a disproportionate split and so you, I obviously I can’t say you can’t do that. You can, but it may not be the most equitable solution here.

So probably the most equitable is in terms of priority is kind of like in-kind division. So if you have a spouse that say you represent the non-cryptocurrency holder spouse. In terms of language in the decree, you want to, that non-holder spouse likely does not have a wallet set up yet. So they need to be able to set up a wallet. So you can say the non-holder spouse has X number of days to obtain a cryptocurrency wallet and the necessary hardware to provide the holder spouse with the wallet address.

Then the holder spouse needs to provide either and accounting of all the cryptocurrency he or she owns and wallet address within X number of days to the non-holder spouse so the non-holder spouse can verify all existing coins at that period of time. Then the next step is with an X again, keep the deadlines so that you have some enforcement options at the back end. So within X number of days of receiving the wallet address, the holder spouse will transfer the coins into the non-holder spouse’s wallet.

And then finally, the parties will divide any fees associated with the transfer of cryptocurrency pursuant to this paragraph, there’s a gas fee is what they’re called. So you just want to make sure that you have it’s kind of like the transaction fee for a credit card, you have a gas fee associated with that. So just make sure again, you’re dotting your I’s and crossing your T’s by dividing the gas fee as well. So this is kind of probably the best, most equitable solution. But in my practice, usually the non-crypto currency-holding spouse doesn’t have anything to do with cryptocurrency.

Holly: I can totally see that being the case.

Stephanie: So I think, the next best option that I wanted to at least like articulate because I do think that first option is not super, like grounded in reality a lot of the times is that you can have you can order the cryptocurrency sold. Similarly, you can kind of effectuate the like kind exchange in that similar kind of way. So say, if someone holds again 10 Bitcoin, you can say you have to sell five Bitcoin on this day. And you can use an exchange to do that. And then you’ll provide the non-holder spouse with the transaction history or record that this cryptocurrency was sold for this price, and then here, then transfer the amount of cash to their bank account.

So in that kind of way, like you’re not necessarily like, there’s probably some delay in terms of like, you’re not getting the exact time value, and you’re not riding the waves of the increase potentially, or the upside. But at least you’ve got cash in hand. And so that in my experience has been kind of what my non-cryptocurrency holder spouses have opted for as an option instead.

Holly: So when it comes to enforceability of doing anything with crypto, if there is no third party involved, like a bank. You know, if we have a traditional retirement account, we can get a QDRO and we give it to the bank or the plan administrator or whoever. And they will divide it regardless of the cooperation of the original owner of that account. So with crypto, is there any way of you know, is there any court order that you can get to make a third party force the division? Or are you relying 100% on the original holder of the crypto to comply?

Stephanie: Unfortunately, it’s more the latter. Because there isn’t that kind of third-party intermediary. And this is the issue that, again, that the federal government is seen with in terms of regulating cryptocurrency as a whole in general. And I will say in I recently drafted an article that was published by the Penn State Law Review on cryptocurrency and divorce. And within that I tried to look up cases with cryptocurrency and divorce in the divorce context as well. And they’re really they’re very few cases on this.

And no real cases on the kind of enforcement at least within the divorce context. In terms of kind of outside the divorce context, yeah, similarly, like in terms of enforcement of money judgment or transfer, it’s very difficult. And so that’s why I said it. That’s why my recommendation also is like to keep it outside of the rest of the community or marital estate. Because if you are, you really if it comes to a point where you’re looking at a very high valuation of cryptocurrency, there are potential means to do so.

But they’re very costly. And, again, if you were holding up the entire rest of the division of the estate based on the sale or the transfer of this virtual currency, you’ll be in a situation where you’re gonna be running ooh, sorry, running up a lot of issues with the rest of the division of the assets, too. So you want to have that kind of separate and apart in a separate provision in the divorce decree.

Holly: So do you know any resources or anywhere attorneys can go to get more information about cryptocurrency?

Stephanie: Sure. So there’s a lot of online resources. So coin desk has a lot. A lot of the traditional financial websites, so Investopedia, Forbes, have a lot of articles regarding kind of the baseline a16z. The otherwise if you want to get additional information from the cryptocurrency exchanges, there is still the opportunity to do so. So you can still subpoena information. If you’re talking about an individual client, you can subpoena information from the exchanges, just like you do with a traditional bank account. There’s case law that says you can subpoena Coinbase which is a very large cryptocurrency exchange.

So if you’re talking about information that’s aside from like, kind of like general background information that’s specific to a particular party in a case, then you can issue subpoenas to the cryptocurrency exchanges in the same way. And you can look up, Coinbase in particular has the address for the registered agent, which I know is also like half the battle in issuing subpoenas in the first place. So they do have the registered agent for the particular state available for attorneys to issue those subpoenas to. And usually they, I found that they’ve been pretty helpful in terms of talking through like what information that we need.

I think the biggest thing to kind of keep in mind there is that again, the virtual wallet address is kind of what you need to get that information regarding the transaction records. And because they’re pseudonymous, like you couldn’t just traditionally in a subpoena, as you know, you use like the person’s name and social security number. That’s not as helpful here. We’ve got to know kind of what that the pseudonym is or the wallet address is in order to trace those funds. So that’s the kind of potential limitations in terms of looking up information for a particular party.

Holly: So we’re just about out of time. But one of the questions I ask everybody who comes on the podcast, is this. If you could give one piece of advice to young family lawyers, what would it be?

Stephanie: So in a general sense, I would say remember that clients are human and have empathy. So that’s something I’ve really tried to instill in my students. I had the map out the standard possession order, which drove them insane.

Holly: Welcome to our world. Welcome to our world.

Stephanie: I was like here’s a Waco, the Waco school district schedule. And here’s holidays. And I said, the kids don’t have any activities to schedule around. So this is not even realistic in that regard. But just looking at the school district schedule, and the standard possession order statute, make the calendar for the parties to be able to show to their children. And I think that really helped humanize the divorce process for them. I think a lot of times as attorneys, people start getting into that rote like copy paste of the traditional form language, and they lose sight of like, what does this actually mean for the clients.

And so I think making sure that you remember that the clients are still humans who need to actually effectuate the orders and have some grace with that is helpful. With regards to this particular topic, I think it’s safe to say the stereotype that the younger generation is more tech savvy does ring true. And that can I think be really advantageous in terms of distinguishing yourself in a crowded legal marketplace like in family law.

I’ll be the first to admit that when I had a contested custody trial, where I found that there were videos of a dad drinking heavily in the background of his teenage daughter’s TikTok videos that I had to ask my law clerk like, what is TikTok? Can you show me your TikTok and show me how to find TikTok videos and how to play them for the judge at a trial. Which I ended up using for trial. So similarly, our law clerks have helped find social media pages or other kinds of incriminating evidence that people have posted online.

And they can find it much faster, frankly, and I’m not not that old. But I think there is a lot of utility there. And I think being able to have the confidence to say like, I have the expertise and the ability to do this, and can really help out in this way. I can bookmark your virtual kind of PDFs, trial binders, if the trial or hearing is via zoom, and help you organize that or help you create visuals for the trial or demonstratives, I think that they know a lot of this newer, newer applications that can can do that in a very effective way.

And I think that’s really valuable to firms and to make yourself very relatable to clients, especially younger clients who are looking for people who understand this, like especially. And so that would be my advice to play to your strengths. It doesn’t have, I think people a lot of the times, you’re like I have to find a niche, like specialization within family law. And I think that what’s often overlooked is that you can also have a particular skill set that can be very valuable as a family law attorney as well.

And then based on that, and a client can come to you and say, you know, I heard from your former client that you were really good at running this particular program that I, you know, run on my daily basis. Especially like accountants, for example, all use similar software. And if you’re familiar with that, you can say like, yeah, here, let’s look at this software. And let’s look at how we can translate that into our kind of balance sheet forms and disclosures. And if you are already familiar with that, then that’s really valuable to a client and potential future referrals as well.

Holly: So where can our listeners go if they want to learn more about you?

Stephanie: Sure. So for my papers, including a more detailed look at cryptocurrency, NFTs and divorce, you can visit my SSRN page. Otherwise, my CV is available through my bio on the Baylor Law website.

Holly: So I don’t want to sound like an idiot but what is an SSRN page?

Stephanie: Sure. So SSRN is a is a website that, where academics can publish their papers. And so I have the cryptocurrency article on there and then other articles that I’ve written and I’ll publish future articles on SSRN as well. So you can just look up SSRN and then my name.

Holly: Gotcha. All right. Well thank you so much for joining us today, and for our listeners, if you enjoyed this podcast take a second to subscribe and leave us a review and enjoy future episodes.

Voiceover: The Texas Family Law Insiders podcast is sponsored by the Draper Law Firm. We help people navigate divorce and child custody cases and handle family law appellate matters. For more information, visit our website at

Subscribe to the Podcast

Follow Us


This field is for validation purposes and should be left unchanged.