Bitcoin? You may have seen in the news that Mt. Gox, one of the world’s largest Bitcoin exchanges, stopped doing business recently. Just what is “Bitcoin”?
Bitcoin is what is sometimes called a “virtual currency.” It technically can only be found on line. Therefore it is sometimes referred to as “digital currency.” No government or political entity “stands behind” the value of Bitcoin and there is no gold or silver or anything, in particular to “back up” the value. The use of Bitcoin, in transactions, is sometimes done because the user can remain anonymous. Also, the use of Bitcoin may facilitate international transactions in some cases.
You may not have heard of Bitcoin before or you may have heard the term “Bitcoin” but thought that it was just some strange thing of no consequence. Consider this though– Currently Bitcoins are over $500 a piece and the total number of Bitcoins in circulation are worth approximately $6.4 billion dollars!
Many stores and sellers of goods now accept Bitcoin instead of, or in place of, cash. Recent articles have pointed out that the IRS has not yet “weighed in” on Bitcoin and therefore tax preparers have issues with how to handle the possession and use of Bitcoin.
People or companies buying Bitcoins store them in “digital wallets” at different companies or “exchanges.” Mt. Gox was one of those and it has been said that the closing of Mt. Gox was equivalent to a bank shutting down and the people with the money in the bank not being able to get their money. Mt. Gox was “missing” over 700,000 bit coins worth more than $500 a piece. They may have been “digitally” stolen.
Tax preparers are particularly concerned with whether Bitcoin is an “asset” or is “currency.” Obviously gains in value will be treated differently if Bitcoin is an “asset” as compared to “cash.” Also there are concerns with reporting requirements for Bitcoin kept “offshore.” Essentially, even if “offshore” Bitcoin only exists as an “entry” in a ledger somewhere.
From a divorce attorney’s standpoint Bitcoin may present problems. The first of those problems would come from the fact that the possession or holding or sale of Bitcoin will not presently be required to be reported on a tax return.
Obviously then, the “discovery” of the existence or use of Bitcoin may be difficult. Attorneys should amend their discovery documents to attempt to discover holdings of Bitcoin.
If Bitcoin is “cash” then it is probably not subject to a restraining order restraining the transfer of assets “other than those in checking accounts.” Restraining orders usually do not restrain the transfer of “cash.”
If Bitcoin is not “cash” then it well may be subject to restraining orders preventing transfer, etc.
If Bitcoin is “held” somewhere on-line and is considered to be a “marital asset” subject to division, then the company which administers the Bitcoin “wallet” or account may be a company a divorce attorney would normally join as a party to a divorce action. However, there may be problems with discovering just which company that is. Also, once the company is discovered, there may be jurisdictional problems with attempting to join the company in a divorce action, here in Ohio, or elsewhere since the company may be in another state or even in another country.
At the Law Offices of William L. Geary, Co., L.P.A. we attempt to stay up to date on all matters affecting divorces and distribution of marital assets.
Call us at (614) 289-1227 if you have questions or a situation where we may be of help.