A single Bitcoin, at its peak was worth over £15,000 and as it currently In August 2018 is worth around £5,000.
Because technology is advancing significantly, and blockchain appears to be a buzzword, the law hasn’t quite managed to keep up with the rapid advancements that are being made in technology.
Bitcoin is what is known as a decentralized, meaning there is no one single entity that has control of it. It is a peer to peer ecosystem that is built on the blockchain.
Blockchain is a growing list of transactions or ‘blocks’ that are built upon. The blocks are linked by cryptography which solves the double spending issue and means that data in each block cannot be amended without most of the community agreeing.
Bitcoin and other cryptocurrency are easily concealed due to their anonymous, unregulated nature. The identity of the owner can be difficult to trace especially once they have placed their asset into storage.
Proof that someone owns Bitcoin or other crypto assets can be difficult to verify and what can be even harder is valuing the assets once they have been traced back to the owner due to huge fluctuations in value.
What can go wrong
Investment in any asset isn’t without risk, and the risk with cryptocurrencies is particularly high. Given that you are investing in an asset that is not tied to any state, and therefore without government regulation investment carries extreme risk and if things go wrong such as vulnerability in the code such as the case of DAO, an organisation which launched with $150 million in funding and was hacked and drained of $50 million due to a vulnerability in its code.
Exchange hacks are also a huge risk, the main hacks to date include Mt. Gox and Bitfinex. In the Mt. Gox hack approximately 850,000 Bitcoin were stolen with an estimated value at the time of $450 million. Although hiding assets in crypto currencies might seem like a solution for a debtor, they might find themselves losing everything.
We’re beginning to see digital assets being used to hide assets in divorce cases, with legal teams having to up their game by finding ways to ascertain the assets that have been hidden using forensic accountants and IT experts.
At some point fiat currency will have been used for the initial purchase so this is where the search should begin, due to wild fluctuations it can still be difficult to ascertain the cost paid and the current value.
With all the above in mind, debtors can and will use cryptocurrency to hide assets, so it is worth bearing this in mind and if necessary looking at large transactions made to purchase such assets in the first place. Cryptocurrency is purchased through an exchange such as Coinbase and an initial transaction such as this will be what you are looking for as a red flag or a sign that a crypto investment has been made.
- In 2009 a Bitcoin was worth around £0.003
- There are over 1800 cryptocurrencies in existence
- The total market cap peaked in Jan 2018 at over $800 Billion
- At its peak Bitcoin was worth almost £15,000
David is an authorised High Court Enforcement Officer and our Director of Corporate Governance