Cryptocurrencies WON’T Replace Offshore Banking. Here’s Why
It has been said time and time again that cryptocurrencies are the “new” offshore banking, and while both cryptocurrency and offshore banking both have their share of respective advantages and disadvantages, some new developments in the cryptocurrency realm are making investors think twice about using cryptocurrency as part of their asset diversification and protection strategies.
It wasn’t all that long ago that investors were calling cryptocurrency the next offshore banking, and it’s not surprise why. There for a while, cryptocurrency was well known to be completely anonymous, offering a seemingly impenetrable level of privacy.
In the beginning of cryptocurrency’s history, which began not all that long ago, people swore up and down that cryptocurrency was more secure than any other form of currency. Because coins are mined, people said that this meant that no single person could have control over the “system”, and this decentralized way of handling money didn’t take long to take off. In fact, many early investors in platforms and coins like Bitcoin have seen hefty returns on meager initial investments, an indicator of early investor confidence.
Many people turn to offshore banking for reasons such as anonymity, security, privacy, and tax savings. It seemed, at first, as if cryptocurrency would be offering all of those same benefits but without the need to go offshore. Instead, investors would be tapping into a global, decentralized currency system.
While there are a few things investors should know before turning to cryptocurrency instead of offshore banking, it seemed like a win for anyone wanting to diversify or protect assets.
However, a major disadvantage has shown itself recently, and investors are starting to see that cryptocurrency might not be everything they had hoped.
A number of occurrences lately have shown individuals that cryptocurrency is subject to unpredictable volatility. As it is based on a decentralized platform, there are problems cropping up, and around the world, countries are tightening restrictions on cryptocurrency. This makes it not so suitable as opposed to before, when it was truly anonymous and hard to trace.
But why? Well, there are series of ‘mishaps’ and events that contribute to the uncertainties.
In September, Bitcoin fell at a jaw dropping rate of 15% per hour. This crash also impacted other forms of cryptocurrencies, such as Ethereum, which usually have rates that run alongside Bitcoin. This crash was one of the most staggering hits to investors who’ve wholeheartedly put faith into the decentralized cryptocurrency system, but that was just one of a few recent events that have investors worried.
Bakkt Bitcoin futures contracts were highly anticipated, and it seemed this Bitcoin-based futures exchange would launch with nothing but success. Well, this isn’t what happened. In fact, Bakkt launched as a flop. On its first day, Bakkt saw low volumes as Bitcoin crashed.
Not only is rate volatility a concern, but regulatory factors should also come into play. As we explained earlier, countries around the world are taking note of cryptocurrency and beginning to crack down.
A great example is Facebook Libra, which promises to unite consumers and cryptocurrency with a more streamlined platform than ever before. Unfortunately, governmental concerns are delaying this launch. Some European countries have already pledged to ban or block Libra altogether. Facebook Libra’s team is working diligently to come up with solutions and plans to launch next year.
Now, when it comes to offshore banking, there are definitely some things investors need to be careful about. There are more regulations involved in offshore banking today than ever, but these policies serve to stop tax evasion and money laundering.
If you are looking to responsibly diversify your assets, you’ve got nothing to worry about. Offshore banking once required investors to travel to the jurisdiction they were investing in, but now, thanks to the digital age, you can do pretty much everything online.
Until the crypto market is becoming less volatile, and there are widespread acceptance and adoption by the financial world, offshore banking is still the way to go for your wealth and asset protection planning purposes.
Due to the erratic price movements, cryptocurrencies seem like a bad idea to your asset protection plan; in asset protection, stability is highly valued. On the other hand, with offshore banking, you can expect a higher level of stability, as well as accessing various additional services — such as having your assets managed by an asset manager.
Then there’s reputational issues. Unlike cryptocurrencies, that aren’t gaining favorable support by many financial institutions and authorities, offshore banks are well-accepted by many jurisdictions and investors — despite all the negative publicity around them.
While both options have pros and cons, we believe that choosing offshore banking is the best option. Cryptocurrency can be good for some things, but its volatility makes it a tough choice for those who are serious about keeping their assets safe.
Published at Sun, 13 Oct 2019 14:48:11 +0000
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