Cryptocurrency and Equalization on Separation in Ontario

Cryptocurrency can sit in an exchange account, a mobile app or a private wallet. If you are separating, you may own some, you may suspect your spouse does, or you may simply not know how it fits into the property division.

This article explains in plain language how equalization works in Ontario and how those rules apply to digital assets. The rules were not written with crypto in mind, so how they apply to a particular holding depends on the facts, and a family lawyer can confirm your position.

How equalization works

Ontario does not divide each asset down the middle. Instead, each spouse works out a net family property figure. Net family property is the value of all property a spouse owns on the valuation date, except excluded property, less debts and liabilities.

The spouse with the lesser net family property is then entitled to one-half of the difference between the two figures. This is the default rule.

For crypto, the starting point is simple: if a spouse owns it on the valuation date, it is property and generally belongs in that spouse's figure, unless it is excluded. How this applies to crypto held in a particular account or wallet depends on your situation, so it is worth confirming with a lawyer.

Valuing crypto

The value that matters is the value of what a spouse owns on the valuation date. Crypto prices can move a great deal in a short time, so the exact date used can change the number significantly.

In practice, valuation usually involves gathering records that show what was held, in which account or wallet, and what it was worth on the relevant date. Which valuation method suits a given coin, token or platform depends on the facts. A lawyer or a financial professional can advise on that.

• Exchange account statements and transaction histories
• Bank records showing transfers to and from exchanges or wallets
• Screenshots or exports of wallet balances, with dates
• Tax filings or slips that mention digital asset gains or losses
• Loans or debts used to buy crypto, which may be liabilities to subtract

When crypto may be excluded or deducted

Some property is left out of net family property. Property acquired by gift or inheritance from a third person after the date of marriage is excluded, though that exclusion does not apply to a matrimonial home. If someone gave you crypto, or you inherited it, it may be excluded.

Property into which excluded property can be traced may also be excluded, other than a matrimonial home. Property the spouses agreed in a domestic contract should not be included is excluded as well.

Mixing matters. In one Court of Appeal case, depositing gift or inheritance money into a joint bank account did not by itself make it lose its excluded character, and the spouse in that case rebutted the presumption of joint ownership with evidence. If excluded money was swapped into crypto, or crypto was moved between accounts, clear records are what make tracing possible.

There is also a deduction for property owned on the date of marriage, other than a matrimonial home. Crypto you already held when you married may fall into this category. The same property cannot be both excluded and deducted, because that counts it twice in that spouse's favour.

Suspecting hidden wallets

Crypto is often the first thing people worry about being hidden. A private wallet may not appear on any statement. Even so, there are usually traces: money leaving a bank account to buy it, an exchange email, a hardware device, or a recovery phrase written down somewhere.

The process for requiring financial disclosure in a family case, and what a court can do when disclosure looks incomplete, are matters a lawyer can explain for your situation. What you can do now is document what you honestly know and avoid anything that could look like interfering with evidence.

What to do next

• List every platform, wallet and device you know about, with approximate dates
• Collect bank and credit card statements that show crypto purchases or sales
• Note whether any crypto came from a gift, an inheritance or before the marriage
• Do not move, sell or delete anything without advice, as that can create problems
• Speak with a family lawyer about valuation, disclosure and any domestic contract you signed

Equalization can be varied only if equalizing would be unconscionable, a high threshold where mere unfairness is not enough. So accurate records from the start usually matter more than hoping for an adjustment later.

Frequently asked questions