It would appear that the law and the courts will yet again be fighting to catch up with technology as virtual currencies become a topic in divorce proceedings.
Due to their complex nature and the potential for users to remain anonymous throughout transactions, virtual currencies and cryptocurrencies are consistently associated with criminal activity including fraud of every imaginable kind, sale of illegal goods and substances and computer hacking. Since its development in 2009 Bitcoin has enjoyed immense news coverage and discussion and has not escaped usage by those involved in such unsavoury activities as detailed above. Although Bitcoin is legally used by many people in transactions and is now an accepted form of payment by many vendors it remains a valuable route for those who wish to hide their identity or activities.
Divorce in Scotland involves a fair sharing of the "matrimonial property" between the spouses. Matrimonial property includes everything the couple have accumulated during the course of their marriage and anything which was purchased with the marriage in mind. The starting point is a 50/50 share between the divorcing spouses subject to certain provisions and arguments which can alter this split.
Where a spouse is not inclined to share his assets equally and fairly attempts may be made to hide assets or even divest themselves of their property to avoid their other half making a successful claim. It has been suggested that Bitcoin is a system which could be used by a spouse to hide funds in anticipation of divorce proceedings although, at this point, there have not been any reported instances of such actions.
Some individuals will go to extremes to protect their assets and it is not unknown for a spouse to transfer funds to a relative or friend out with the jurisdiction of the UK to avoid "losing" them to their spouse. Similarly tax evasion strategies and hidden funds have been a part of the financial world for a long time. Therefore, the use of Bitcoin to hide assets is more of an advancement than an innovation.
Although Bitcoin can be traded with relative anonymity it is becoming more difficult to remain anonymous when "cashing out" through the well known trading exchanges as several of these organisations require identification documentation before users are given access to the exchange which increases the potential for the identity of users to be traced. Needless to say the resources (complex algorithms and a technology genius to implement them, along with a court order and a savvy solicitor) required to trace an individual's identity through their transactions are not readily available on the high street.
It is inevitable that divorce proceedings which include debates about Bitcoin are on the horizon and virtual currencies and cryptocurrencies should be borne in mind by all parties involved in divorce proceedings.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
