Cryptocurrencies' Volatility: The Case for Offshore Banking

The boom and bust of cryptocurrencies are well-documented by the media. In the process, many individuals are becoming rich almost overnight, while many others are losing money, even fall deep in debt.

Yes, many gambles for the future, taking loans to buy cryptocurrencies. They are driven by the promise that cryptocurrencies will always go up in value. But not many of them know that there is one big problem which prevents cryptocurrencies in becoming THE payment method of choice, as well as sound investments.

The problem? Volatility.

Cryptocurrencies are known for large swings in prices, which make that heaven for speculators but hell for investors. In other words, for other uses than speculating, cryptocurrencies aren't just ideal. Plus, with the bans and new regulations, we just don't know what the future hold for cryptocurrencies. Crypto HODL may not agree with us, but we can't deny the reality of the market.

Let's take Bitcoin as the largest cryptocurrency in the market. Bitcoin reached $20,000 per by the end of 2017. These days, bitcoin is valued at around $7,000 with no sign of recovering anytime soon. The 65 percent drop isn't what investors and business owners expect. Plus, with the increasing transaction fees, retailers face additional costs related to bitcoin transaction.

While we believe in the future of cryptocurrencies and blockchain, these aren't ideal as the current payment method. For example, Steam (gaming platform) dropped bitcoin payments due to high fees and volatility. Microsoft also dropped bitcoin payments.

Here's the thing about bitcoin payment in a volatile market: Suppose you are an ecommerce store taking bitcoin (BTC) payment, you'll need to update your prices often. Very often. You just don't want to take BTC payments knowing that the BTC value drops by 20 percent in minutes. That just means that you're losing 20 percent of profits just due to the dropping value. With the transaction fees and costs of maintaining the pricing systems that reflect the volatility, removing bitcoin payment method seems like the way to go.

Cryptocurrencies: Asset protection woes

The same problem is true to those who use cryptocurrencies for asset protection. It's true that things look good on paper: Your crypto 'account' is decentralized, with nobody can control it but you; relatively low transaction costs, especially compared to SWIFT; fast transaction, which enables you to move crypto from one account to another in minutes; these are just appealing to asset owners.

Even, the secrecy due to the inherited anonymity touts cryptocurrencies as the chief replacement for the 'ailing' offshore banking industry.

However, the volatility blows all the upsides.

You see, when you protect your assets, you also want to protect their value. You even expect those to rise in value. While riding the crypto trends could work, it's not in line to what you'd expect with your asset protection plan. For asset protection purpose, you would want less risky investment methods.

You don't want to see your $100,000-worth of crypto drops to $60,000; which leads us to the next section...

Cryptocurrencies won't replace offshore banking

Until the market and regulators can 'create' a condition where cryptocurrencies' value is considerably stable, which makes them an ideal store of value, crypto won't replace offshore asset protection anytime soon.

When you protect your assets in offshore structures - shell companies, banks, or a combination of those - not only secrecy, but you can also access services and opportunities not available elsewhere, including but not limited to:

• - Access to offshore investment opportunities, such as overseas properties and stock exchanges.
• - Secure your assets in trust funds, with the terms of your choice.
• - Opening a gold-backed bank account, and get a debit card to use in 200 countries.
• - Buying physical precious metals - the ultimate store of value - and secure those in overseas storage facilities.
• - Access to currency trading platforms, regulated by the offshore jurisdiction of your choice.
• - The same secrecy feature cryptocurrencies have - if you choose the right offshore jurisdiction.

Trust issue

Cryptocurrency holders and offshore account holders are both viewed negatively. You are considered as someone who wants to hide your 'dirty money' and evade taxes. While it's true to a few, most of us use crypto and offshore accounts for asset protection purposes, legally. Regardless, due to those reputational issue, it's often challenging when you want to transact with others.

What's worse for crypto holders (and HODLers), most banks - including those offshore - avoid dealing with anything related to cryptocurrency transactions. On the other hands, if you bank with a reputable offshore bank, you can easily do transactions between your offshore accounts and other bank accounts worldwide.

Takeaway

We don't doubt the potential of cryptocurrencies. These may become one of the best ways to protect your assets in the future. However, due to the volatility and pushback from the governing bodies, crypto asset protection is probably riskier than having your assets 'stashed' in a questionable offshore jurisdiction in the Caribbean.

That said, offshore banks - despite all the push toward transparency - are proven to be some of the best solutions for asset protection. Even with secrecy features considerably reduced, those are still offering adequate protection - thanks to the offshore jurisdiction's laws and regulations.

You might want to benefit from both worlds, having assets stored in both cryptocurrencies and offshore banks. Consider the pros and cons of each option, and - as always - consult with your financial advisors and lawyers for the best ways to do it.