Cryptocurrency exchanges provide platforms for secure, instant and global transfers of money. According to Forbes, the blockchain technology that encrypts transactions and makes them virtually tamper-proof also provides a significant measure of anonymity.
This secrecy has made digital currency exchanges hotbeds for black market and ethically questionable financial activity. However, if you are facing a divorce and are reluctant to comply with California community property laws, think twice about using cryptocurrency as a method for hiding your assets.
Cryptocurrency transactions are not entirely anonymous
You store all of your cryptocurrency activity and personal information in a “digital wallet.” You hold the only means to access the data in the wallet by way of a private encryption code, or “key.” Since no one else can access your wallet without your code and your private key cannot identify you, you might believe that all of your activity is secret.
Still, you must understand that blockchain technology records every encrypted transaction on a public computer network. Anyone knowledgeable with the system can view cryptocurrency transfers, and computer forensic specialists are continually improving their methods of tracing activity back to the original sources.
Reactionary transfers could be fraudulent
Savvy investors may choose to use digital currency as legitimate asset protection as a part of their overall wealth strategy. Yet, there is a line between legal asset diversification and fraudulent property transfers.
Divorce court proceedings typically require your complete disclosure of all assets, and that includes cryptocurrency. Also, the process of financial discovery will not stop with a simple snapshot of your current holdings. A forensic accountant could view digital currency activity that took place just before your divorce filing as reactionary and intentional to hide assets.