Bitcoin volatility

Bitcoin volatility

In Illinois, incident to resolving a divorce case, all assets and liabilities are bitcoin volatility to be identified, valued, and allocated between the parties equitably. Prior to either reaching an agreed upon division of assets, or proceeding to trial on the issues of property division, all assets must first be identified and then where possible, valued. While identification of the existence of bitcoin or other cryptocurrency is the starting place, one must first understand what bitcoin is.

Bitcoin is an electronic currency that allows users to transfer funds directly to one another through a peer-to-peer system without the need for a middle man, like a bank or Western Union. Bitcoin, despite its name, isn’t money. It does not have governmental backing. According to the Journal, its extreme price volatility significantly diminishes its usefulness as a reliable unit of account or effective means of payments. Bitcoin might, however, serve as a sustainable store of value, like gold. If Bitcoin is not money, then why is there so much emphasis on its identification and valuation in divorce? For divorcing couples, there are two main challenges in dealing with a spouse that might have purchased bitcoin or other cryptocurrencies.

The first is dealing with a spouse who is determined to use bitcoin to hide assets, much the same way as a spouse might have used an overseas bank account to hide assets in divorce years ago. The issues of identification of assets, particularly ones contained solely in a digital platform, require additional detail and attention by divorce attorneys. Unlike transfers in and out of a bank account for which one can request copies of statements, bitcoin transfers occur primarily via the web or in cash. Bitcoin can be owned individually or through an exchange and can be bought and sold person to person or through an exchange. Perhaps a records subpoena should issue to one or more exchanges that trade bitcoins. Also, government regulations are in their beginning stages.

The IRS is now looking at gains on the sale of bit coins as a reportable taxable event, which would provide another avenue for discovery. The second primary issue related to bitcoin and divorce is the market volatility. As discussed above, valuation of assets is a key component to resolving a divorce. Because of the extreme price volatility of the cryptocurrency market, valuation of said asset may prove difficult.

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