Bitcoin: The Ultimate Offshore Bank Account?

By Anthony Freeman

In my previous posts (here, here, here, here and here) I’ve highlighted the many benefits of bitcoin and I recommend you review them for further understanding. 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 (taxation)
  • Protection from Litigation
  • Currency Diversification
  • Jurisdictional Diversification
  • Global Access to Funds

Here is how bitcoin satisfies each of these goals:

Financial Privacy

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 (see Open Transactions: link 1, link 2) .

Protection from Theft (taxation)

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”.

Currency Diversification

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.

Jurisdictional Diversification

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.

Additional Benefits:

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”.

Mobility

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.

How You Can Help Make Bitcoin Ubiquitous:

Become an Exchanger

Not in the business sense but in the individual sense. Become an individual exchanger amongst your social network. Centralized exchanges are vulnerable to attack by existing power structures. Cultivate and utilize a personal network of exchange partners to help you move in and out of your existing national currency. As more individuals become users/exchangers liberty will flourish.

Conclusion

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.

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22 Responses to Bitcoin: The Ultimate Offshore Bank Account?

  1. Pingback: KeepYourAssets.net » Article: Bitcoin: The Ultimate Offshore Bank Account

  2. Bob Bevans says:

    Hi Maybe I missed Something in reading all the wonderful info about Bitcoin————–

    I am under the impression that any thing you put or receive on you computer can

    be retreived by computer experts———-and the hard drive in you computer is a

    magnet storage compartment???? Please advise if my impressions are well founded or

    all wrong——–here’s hope I”ve heard wrong information.

    Thanks Bob

    • xHire says:

      Next version of Bitcoin client (0.3.25) will have built-in feature to encrypt your wallet and I have already tested it. If you encrypt the wallet and then want to send coins, you have to provide the password (but you can still view your transactions — even those newly comming).

      Yes, there is still some danger — e.g. keyloggers or so, but probability of such password loss is much lower than a case when someone just copy your wallet.dat from your PC. :-)

      • anoniemlegions says:

        Thats why you have a “vault” usb/disk/cd drive that holds your funds on a COMPLETELY OFFLINE computer or device. its just information, 1′s and 0′s. Just like money is Paper, paper can easily be destroyed or stolen.

  3. X says:

    Left out the small detail that the value of “The Ultimate Offshore Bank Account” undergoes wild fluctuations.

  4. Jaro Siek says:

    @Bob: Full disk encryption can save you from that, problem disappears.

    • molecular says:

      It’s a bit harder than that, but certainly doable. Protect your wallet. The offshore wallet should be “offline” (generate addresses and keep the privkeys safe, can be done offline). Case closed. Security is a matter of motivation.

    • molecular says:

      forgot to state why disc encryption is not sufficient: get rooted/owned, attacker can just copy wallet.dat while you’re surfing porn.

  5. Noesis says:

    While I appreciate the birth of digital currency as I ahve been “there” since day one when e-gold appeared (I have an account in the low 100,000 – not the amount the account number which were issued sequentially).
    I was involved in market making and have seen the rise and fall (mostly fall) of many of these so call “next currency”.
    While I do understand and appreciate the difference Bitcoin brings to the table, what I have more of an issue with, is the “selling pitch” – hype kind of tone I see everywhere on Bitcoin and as always underestimating the risk and overstating the virtues.
    I have yet to find a balance article (looks like I’ll have to write it myself :-) exposing objectives pro and cons.
    -99% of the online population have no clue what encryption is yet how to use it, which is not a business model that is prone to deep and fast market penetration
    -Underestimating government goons is usually a mistake. Once they feel threaten enough they simply do what they want to do.
    - Whatever YOUR belief is, the goons WILL label this as “tax evasion”. No matter what YOU think, they decide that not you. Again I have no problem with a p.o.v that the system is corrupt, the real question is are you willing and ready to go all the way to defend your beliefs against the few that know nothing else but use fear, fraud and in last resort force against you?
    - While I do not believe in our current ma-”fia-t” monetary system and I always welcome competing ones, I do not believe that a “fix” amount of currency is any better or the ultimate answer to the current corrupt one. One, this is a currency that will be prone to wild fluctuation both because of a small number of participant (rememebr barrier to entry is still too high for the masses) and that limited “float”.
    Second the limited quantity will create an artificial scarcity, ever and ever favoring the few over the many. It might be argued that it was created to create an artificial inflation in order to favor the first comers over the late comers.(The Tulip mania) With a cap/limit this becomes a closed system and is bound to collapse at some point, and is the furthest thing that is needed from a global humanitarian currency based on our god given unlimited energy.
    -The tone that is use to promote Bitcoin is too naive and biased, a self serving point of view.

    What I do like and I like it a a lot is the Peer to Peer design. That IS indeed the revolution. I do believe that it is the way it should be. At the same time whether it is Bitcoin or an eventual sibling the ultimate solution will have to come from a P2P structure.

    So for that reason alone I am opening my bitcoin account and will start accepting Bitcoin but I would never try to convince anybody to do what I do. It really is not for everybody and underestimating risk and over promising virtues is always a recipe for accident. Most of the verbiage around Bitcoin is sold with hype and bound to disappoint many people.

    If it’s meant to be it will flourish by itself. No need to push. Be rational and objective. In the end it will go a much longer way.

    • Tom says:

      Hey Noesis,

      Thank you for injecting a sobering note of reality into the discussions!

      Yes, Bitcoin is a new technology for what proponents call “maintaining your privacy” “protecting your assets,” and what the detractors/statists call “tax evasion” “hiding your assets,” but there’s something people don’t “get” in the Bitcoin geekworld:

      1. Technologies for maintaining your privacy and protecting your assets have been around for thousands of years (yes, since Before Christ)

      2. Yes, Bitcoin is a great technology for maintaining your privacy and protecting your assets, but it doesn’t provide any more protection than offshore foundations, numbered bank accounts, encrypted telephony, Hawala, etc. ever have in the past.

      3. Tax investigators are going to use the same techniques that they always have to root out people who are saving and spending assets outside the monitored “conventional economy”, namely:
      i) honeypots
      ii) stings
      iii) dumpster diving
      iv) survelling lifestyle (i.e. can a guy claiming an annual income of $63,000 really afford to drive a Mercedes 500?)

      4. Think you can avoid being convicted because you keep everything encrypted: in many jurisdictions, yeah, that’s true. But a guy in the UK went to jail for violating that country’s “password divulging” law.

      Go to jail for “financial crimes”/go to jail for keeping your password? Still not good.

      In many jurisdictions where the cops have a lot more discretion, you can experience the joys of “rubber hose cryptography” (RHC, look it up on Google) And yes, RHC has been used in the USA, not just in obscure tinpot dictatorships. The 4th ammendment doesn’t always work in the US when the cops/IRS guys know the judge will give em a free ride should they hold you for a few days, apply a little violence, sleep deprive you . . . and so it goes. Just as an aside, should you think you might be able to hold out long enough for your lawyer to use habeas corpus to spring you from the ruber hosers’ grasp, look up “dieseling” as it’s used by the US prison system to avoid habeas corpus issues, should they have someone they want to hang onto & work over.

      • olhovsky says:

        “Rubber hose cryptography” can be avoided by using a hidden encrypted volume, stored inside another encrypted volume.

        The idea is that you give out the password to your encrypted volume, and it’s impossible to know if there is another encrypted volume within it that you haven’t given out the password to. TrueCrypt has this feature — go have a look at it.

  6. john j says:

    The tone of the KEEP YOUR ASSETS group has been to tell everyone that bitcoin is the new panacea. I, however, must agree with the cynics on this chat who have presented some very strong issues that have danger signs in them…computers being the most formidable, etc. If a group who identifies itself as “anonymous”, can hack into the big boy’s system, what makes these people believe they are exempt? No, it is still true, “a bird in the hand is worth 3 in the bush”.

  7. angus boyd says:

    You really have to admit that the bitcoin technology is remarkable, the first of its kind. I’m talking about its distributed nature. This makes it much, much harder for the goons to attack, if they can at all. The appropriate strategy, of course, is to hedge as much of one’s assets into it as one feels is prudent given the risks. I would think at this time choosing to have nothing in bitcoin is a pretty bad idea.

  8. phungus says:

    If you are willing to put down a piece of technology, you should also be willing to read more into the actual technology itself. The bitcoin network was designed to be resilient. It has a lot of brain power behind it, in addition to the massive amount of computing resources currently being used to safeguard the whole system. It’s supposed to be more powerful than all of the top 500 super computing installations in the world. All of this power is being used to mathematically prove that the transaction log is legitimate. Also, this project has the full attention of some really impressive technical talent, both from the white-hat side and also the black-hat side. Almost all of the problems have been with third party services which interface to the Bitcoin network. There are many avenues to safeguard one’s coins. All it takes is some reading, experimentation, and less FUD.

  9. joe bloggs says:

    re Anonymous being able to hack to even any of big boys computers.

    It s much easier to hack into “big boys” computers than into a computer of a private individual. Big boys hire a lot of idiots, while it is rather easy to protect a private computer by simply following a handful of “best practices”.

  10. Aridzonan_13 says:

    Windows is not a platform I’d want to keep any form of wealth / valuable info on.. It’s just not secure. Linux / Apple are the best candidates, due to their inherent security features. But, even at that, there will have to be serious end user back up protocols. A la remote thumb drive back up, etc. Because, no PC / Mac is uncrackable. There is always a way to defeat / bypass encryption. I’m not saying it won’t be difficult. But, FedGov.Inc has plenty of cash to mount attacks on competing currencies. The $ is the defacto world currency and FedGov.Inc (note domain suffix) takes a dim view of any competition. If you don’t think FedGov.Inc won’t use criminal tactics. Ask the folks at GATA..

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