In this post I will focus on what I believe gives bitcoin the potential to become The Ultimate Offshore Bank Account.
First, we have to ask – why do people go offshore in the first place? Here are what I believe to be the top reasons people choose to move their money offshore:
- Financial Privacy
- Protection from Theft
- Protection from Litigation
- Currency Diversification
- Jurisdictional Diversification
- Global Access to Funds
Here is how bitcoin satisfies each of these goals:
Out of the box bitcoin is pseudonymous and very private. Bitcoin is essentially digital cash. When you download the application you can physically store* the funds on your computer, a flash drive, or even upload them to the cloud. Current projects under development hold the promise of making bitcoin totally anonymous .
Protection from Theft
Bitcoin is protected by the peer-to-peer network with no central authority. Combining this network with high-grade encryption makes it virtually impossible for any person, or group of persons, to take your money without your permission.
Protection from Litigation
This falls under the rule of “what they can’t find they can’t get”. By moving your money into bitcoin and obfuscating its whereabouts you become virtually “judgement proof”.
Every national currency is manipulated by central banks and governments. Bitcoin is limited in supply and cannot be inflated like national currencies can. This gives it potential to be an excellent store of value.
Bitcoin can be hidden behind encryption and stored in cyberspace – making it everywhere and nowhere at the same time. What existing power structures cannot find they cannot steal.
Global Access to Funds
Bitcoin can be accessed anywhere in the world. Not even an internet connection is necessary.
No Counterparty Risk
When you store assets in any bank or gold-storage facility, those funds are an asset on your financial statement but they are also a liability on the financial statement of the other party. This exposes you to the risk of default, bankruptcy or fraud by the other party. When you retain physical possession of your assets through bitcoin – you eliminate this counterparty risk. Like physical possession of gold and silver, bitcoin is an asset with no corresponding liability.
Ease of Use
While there is a slight learning curve required to use bitcoin, you don’t have to fly to another country to open an account – nor do you have to provide any type of identification or tax number to own bitcoin. You do not need anyone’s permission to use bitcoin. It is truly “the people’s money”.
You can cross borders with no physical currency on your person yet you can literally have access to a fortune via a flash drive or a simple internet connection.
The Network Effect
If more people across the globe discover the value and usefulness of bitcoin it will rise in value and usefulness to you.
Cyberspace is the ultimate offshore and bitcoin has the potential to become the ultimate offshore bank account.
*Technically, you do not store funds on your computer or other device. What you actually store are your “private keys” which give you title and control over the accounting units referred to as “bitcoin” which are tracked on the peer-to-peer network.