One pre-occupation that the wealthy have and which sets them apart from the average Joe has to do with how the rich protect their assets and property. The common man keeps most of his wealth in the local bank and/or in property that can easily be tied to them. The big shot politicians, shrewd people in business and a slew of others who want to protect their wealth from the uncertainties of human existence. You cannot foretell when and how a political or economic turmoil may affect your wealth and assets, be it the cash stashed in a local bank or money put into stocks and government bonds. It is out of this that people often desire to access the ultimate security regarding asset protection. There has been one very infamous way of going about this business of asset protection: off-shore banking. There seems to be a new kid on the block jostling for the same recognition: Bitcoin.
And so we ask Offshore banking vs. Bitcoin- which is it?
We will look at it this way- both offshore banking and Bitcoin are likely the top two ways of protecting your wealth against the aforementioned uncertainties or the itching fingers of the government. But which is better? We leave that to you to decide after you are done reading this article.
Offshore banking
Offshore banking is often associated with the opening of bank accounts in low-tax jurisdictions or what is commonly referred to as tax havens. These countries, offer your business or assets minimal tax liability, all in an environment that is stable both politically and economically. Many people around the world would rather maintain an offshore bank account to protect their assets, for privacy, and for other financial or legal advantages not offered by their country's banks.
Another reason people go for offshore banks is that the countries that offer such banking services do not subject holders to stringent regulations regarding disclosure of information. For example, the Swiss Banking Act 1934 prohibits banks from disclosing the names of account holders. The banks operate in secrecy, often providing confidentiality protection that "home" banking does not.
Offshore banks also accord you a chance to transfer your money and other assets in case your home country becomes politically or economically unpalatable for your business or wealth. For instance, government bail-ins and capital controls as happened in Cyprus or bank deposit taxes as was the case in Spain might mean to protect your money, you'd be better off with it in an account somewhere in the British Virgin Islands or the Cayman Islands.
The main attraction when it comes to offshore banking is the privacy and safety protections put in place to the benefit of clients. Assets and finances are often disconnected from the account holder to protect them. However, privacy provisions in offshore accounts can be diluted in the face of a criminal charge under international law, tax evasion cases, and money laundering. And so, though safe and privacy-oriented, tax havens are still vulnerable to the whims of central jurisdictions. It may not be an everyday issue, but a possibility all the same.
Some of the famous countries for various types of offshore bank accounts include the Cayman Islands if you are looking for tax benefits. Singapore, if you wish to protect your hard-earned wealth. Switzerland, if it's your assets that need ultimate secrecy and privacy; and Nevis, if you wish to incorporate your company for various financial and legal benefits.
With an offshore bank account, whatever happens in your country doesn't affect your assets or financial wealth. Nevertheless, offshore banks could have one serious limitation: they are controlled by a central body and provide a single point of failure. Outside pressure can reveal everything about you.
But how does the offshore bank account compare to the use of Bitcoin as an alternative? I have used the word "alternative" to avoid the more partisan "replacement" that would mean I favor Bitcoin.
Bitcoin
Bitcoin is by far the best blockchain virtual currency at the moment. It is accepted in as a legal payment currency in some countries like Japan and many others are expected to follow suit. While this increased acceptance and use is good for Bitcoin as a payment system, it's what the Bitcoin platform can help achieve that's fascinating.
We know it's decentralized and transactions are private and anonymous. So, does it offer any challenge to the use of offshore banks for asset protection? Let's find out what Bitcoin is like.
While offshore banks are located in low- tax and stable jurisdictions, Bitcoin isn't subject to any jurisdiction. It cannot be controlled by any single government, political power or financial entity. You cannot pinpoint and say," Here" is Bitcoin's boundary. Therefore, Bitcoin is truly offshore and can be used by anyone to protect their assets and wealth.
Bitcoin offers true anonymity. On the Bitcoin network, only your public key (receiving address) is available to others. Otherwise, all your personal information cannot be linked to you as an individual. For example, early February, an anonymous buyer bought Bitcoin worth $400 million, but his identity could not be ascertained. What this means is that assets and transactions in Bitcoin blockchain cannot be linked to you unless you give out your private information. So for those who wish to zealously protect themselves from the public’s or governments curiosity, Bitcoin offers a way out as long as they ensure they do not leave any breadcrumb that can link their public key to themselves.
Additionally, Bitcoin and its blockchain platform can't be subjected to political or economic pressure/sanctions. This is because Bitcoin isn't owned or controlled by a single person. Unlike human controlled jurisdictions, Bitcoin cannot end up having a sovereign debt crisis. And therefore, your assets can't be affected by debt crises that force governments to declare capital controls among other measures. When such a case arises, you won't be able to access your money from the bank. But with Bitcoin, capital gains and nationalization processes don't impact because it doesn't fall under any jurisdiction.
Bitcoin doesn't require any extra "banking" charges that are levied by traditional offshore banks for things like security and privacy. With Bitcoin, you do not need banking experts, brokers, and lawyers to help you set up and manage an account. As such, Bitcoin offers the added advantage of being cheaper while still being better in terms of security and privacy.
One disadvantage of Bitcoin is its volatility. Using it to keep monetary assets may be affected by huge price swings that sometimes take longer to correct. So, assets worth this much today maybe lower tomorrow or exponentially grow.
Your verdict: Offshore banking or Bitcoin
We've looked at Bitcoin versus offshore banking and do believe you have your say on which one offers better protection, security and other financial benefits. Now it's upon you to decide which one fits your portfolio. Remember, there can be legal implications if you are found to be using any of the two methods for tax evasion, money laundering, and other related criminal offences.