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Did Bitcoin make it easier to hide assets in a divorce?

Over the last year the term Bitcoin entered the lexicon of languages the world over when federal investigators shut down an Internet black market known as the Silk Road. It’s because of this that Bitcoin often conjures up images of illegal activity such as Ponzi schemes and drug sales.

But now bitcoins are starting to become associated with another nefarious behavior: hiding assets. Lawyers around the world are starting to see cases where people are concealing the true wealth of their assets by purchasing bitcoins then transferring the bitcoins to friends. With relatively no regulations for this cryptocurrency, people are now starting to see how problematic this can be in cases of divorce.

Some of our California readers might be asking: how are people able to use bitcoins to hide their assets during a divorce? Isn’t there a paper trail to follow? Unfortunately, the answer is no. Because of the anonymity provided by Bitcoin, it’s often difficult to link an individual to any one account. And because the currency is so new, many state laws do not account for the currency when it comes to disclosing assets in a divorce.

This could become particularly problematic for states such as California where community property is divided evenly in a separation. If a portion of those assets are missing and never disclosed, then one spouse could receive less in a divorce than they deserve. If that spouse were to learn about these funds later on then it could lead to further litigation that could prove far more difficult to sort out than the divorce.

Though it’s true that state courts may not at first know how to handle cases where a spouse has hid assets in bitcoins, the more prominent these cases become, the less of a challenge they could present judges. Of course, as with any legal issue, we will simply have to see what the future holds for Bitcoin in this case.

Source: CNBC, “Bitcoin could be used to hide assets in divorces, warn lawyers,” Jane Croft, June 3, 2014