United States: Are Bitcoins And Other Cryptocurrencies The Next Swiss Bank Accounts?

We all know the French proverb; the more things change the more they stay the same.  It has a place in the current controversy over the sudden collapse of Bitcoin's leading dealer, Mt. Gox. Bitcoin is a virtual or cryptocurrency.  It is an asset that a customer holds in a form where only the asset holder and the person with whom he transacts are aware.

Bitcoins are created through a process termed "mining" by which an investor typically puts up cash in exchange for debits logged on an electronic ledger. Mt. Gox was the largest of the exchanges offering to buy or sell bitcoins at prices determined by supply and demand.  The system was created in 2009.  It soon attracted legitimate businesses because the transaction fees were substantially less than credit cards.  It also attracted customers interested in selling merchandise and services that they did not want traced.  Like most other currency, there are actual coins minted but the system is predicated upon electronic transfer rather than some form of specie.  While Bitcoins have been issued for several years now, the press began to report extensively on this new "investment" when prices rose precipitously from $100 in mid-October, 2013 to $1,100 by years' end.  Since that time they have declined by half to about $575.

Ironically, the explosion in Bitcoin prices coincided with the announcement by the Swiss government that it would become a party to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.  While the title of that protocol leaves something to be desired, the net effect was lauded as "the end of banking secrecy" in a country long considered the home of the private untraceable bank account.  While this arrangement has not yet been formally ratified by the Federal Assembly (the Swiss Parliament) it is expected to pass as the result of pressure that began with the money laundering traced to the September 11, 2001 attacks and subsequent mass migrations of deposits during the 2008 financial crisis.  Swiss banking giant UBS began to do this in April, 2009.  In July, 2013, the Swiss Courts further opened the door to these kinds of disclosures to US tax authorities.

Today 58 nations are members of the "Convention."  The purpose of the compact is to permit taxing authorities of the member states to trace the assets of its own nationals beyond the borders of the lands where they reside.  While the list of adherents includes most major countries, the more noted tax havens in the Caribbean have not jumped on the bandwagon.

Why is this topic part of a discussion about divorce?  For decades our profession has dealt with the suggestion that one spouse is holding assets "offshore."  Inevitably this allegation was met with the lawyer's inquiry: "Any idea what shore?"  The more famous sites included the following island nations: Bahamas; Cook, Caymans, Leeward, St. Vincent & Grenadines.  In addition, Dominica, Liechtenstein, Lebanon, Panama and the Philippines were found on a list compiled by the Financial Action Task Force.   Israel, Lebanon, Russia and the Philippines have also been named as potential hideouts.

Bitcoins offer a new haven and one that an investor need not visit to open an account.  In addition Bitcoins are but one form of cryptocurrency. Wikipedia currently lists nine other forms of this new financial instrument and suggests that there are more than fifty others.  See Cryptocurrency; Digital Currency.

The danger is that a spouse wishing to hide assets now has an untraceable means to accomplish his or her purpose.  If there is good news, it is that these forms of assets are highly volatile and some economists have suggested that these kinds of systems are not sustainable.  Typically, once fiat or government regulated currency enters these markets it is not exchangeable for any other form of hard currency.  It may be exchanged or other virtual currency but unless these other systems survive, there is risk that the entire investment could be lost.  If it is hacked or otherwise stolen there is essentially no recourse.  But people determined to keep money away from the claims of a spouse may be willing to absorb that risk.

Bitcoins received another blow this week as the IRS announced how it would deal with them.  The Service announced that bitcoins were not currency but property and were therefore treated as capital assets for which gain and loss needed to be reported.  Thus, if you acquired a bitcoin at $700 and used it in 2013 to acquire a piece of jewelry worth $1200 (because the bitcoin had appreciated), your jewelry purchase was not merely an asset acquisition but a capital gain as well since your $700 investment allowed you to purchase a $1200 asset.  The guidelines also indicate that exchanges that make a market in bitcoins will have a duty to report transactions to the IRS.  How much compliance the exchanges will provide with that regulation remains to be seen.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions