In a community property state such as Texas, it is not too farfetched to imagine a vindictive spouse doing everything he or she could to keep money out of a soon-to-be ex’s hands.
After Bitcoin exploded into the public awareness arena in 2017, Bankrate.com suggests that more and more divorcing partners might view the largely pseudonymous cryptocurrency marketplace as the perfect place to hide cash. Luckily for spouses that become victims of inequitable property division, stashing funds in digital currency may not be as effective as it seems.
Encrypted vs. anonymous digital transactions
Divorce proceedings do not currently have legal protections for cryptocurrency division in place. However, that does not mean that forensic accounting and investigational computer techniques cannot uncover digital currency trade history.
According to Forbes, the blockchain technology that makes cryptocurrency possible involves sophisticated encryption and verification. A completely unique alpha-numeric code represents each transaction, and personal information is only identifiable with a private digital key held by the user. Yet, blockchain platforms are vast global networks of publicly accessible computers, and whereas activity can be challenging to track, it is not entirely anonymous.
Legitimate vs. fraudulent asset protection
Often, those who wish to protect their wealth against unknown future losses or claims diversify funds across independently traded or regulated markets. This form of asset protection is legal, and cryptocurrency can be a viable means when financial planners build it into an overall strategy.
When facing divorce proceedings, some people may react by dumping large sums of money into digital currency exchanges. Courts could easily view this activity not as legitimate asset protection, but instead as fraudulent transfers. The transparent nature of cryptocurrency may cause this method of pre-divorce asset hiding to backfire under the scrutiny of a competent investigation.