De-banking, Financial Exclusion & CBDCs

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It has been three months since Nigel Farage, the former European Parliamentarian and prominent leader of the Brexit movement, faced the closure of his Coutts bank account due to a “misalignment of his views with the bank’s declared values.

In a more recent development, Chase Bank has announced a policy to block all crypto-related payments, aligning itself with other major banks like Barclays, HSBC, and Nationwide in their crackdown on cryptocurrency transactions. These actions cast doubt on the British government’s ambition to position itself as a “hub for digital assets,” which now appears to be more of a symbolic gesture than a genuine commitment.

These instances, including Coinbase users losing access to their Bank of America accounts, the freezing of Canadian trucker crypto donations in February 2022, and the recent passage of the MiCA regulation by the European Union, all lead to the same inference: banks are closing corporate and personal accounts for individuals and entities deemed “unfavorable.”

The Canadian government froze both bank accounts and cryptocurrency donations to the protestors.

Systemically important financial institutions (SIFIs) have initiated a concerted effort to target cryptocurrency exchanges and payment platforms with the dual goal of eliminating competition and launching Central Bank Digital Currencies (CBDCs).

For instance, Binance recently withdrew its operations from several European countries, including the Netherlands, the United Kingdom, Australia and Cyprus. Furthermore, its entire European operations now rely heavily on France, which, to exacerbate the situation, is currently investigating the firm for potential money laundering.

This series of events, along with the exchange’s significant 40% drop in euro-denominated cryptocurrency trading and its announcement of staff layoffs, underscores Binance’s status as a target of regulatory scrutiny, whether for valid or questionable reasons. We should also consider the ongoing SEC lawsuit against Binance US and Coinbase, as well as the recent $30 million settlement Kraken reached with the SEC earlier this year.

Crypto companies, the SEC is not your friend.

The message is clear: CBDCs are on the horizon, set to launch in Europe and potentially in the United States, as part of a global monetary reset aimed at making them legal tender. The pressing question is not if, but when this will happen.

Cryptocurrency exchanges must acknowledge this emerging reality that obtaining government-issued business licenses or building closer ties with governments will not be the all-encompassing solution. While such efforts may offer temporary respite, central banks will never allow private companies to control their own money.

This is precisely why exchanges like Binance (BNB), Tether (USDT), and Coinbase (USDC) are becoming targets. Despite their tokens and stablecoins having more backed reserves than the US dollar, history has shown that this is not a decisive factor. Digital assets can and will be targeted, as illustrated by the case of e-gold, a 1990s and 2000s gold derivative that, upon becoming too popular, was promptly shut down by a U.S. grand jury indictment.

Having spent six months in Medellin, Colombia, a newly emerging crypto hub, I met with numerous exchange representatives who argued that there will always be crypto-friendly jurisdictions where their businesses can relocate to avoid harassment and regulations.

Undoubtedly, such supportive countries will continue to exist. However, how useful is an exchange that loses access to the world’s largest markets? What happens if you can trade cryptocurrencies all day long, but find all on and off-ramping access points severed?

Banks are already grappling with international regulatory pressures, driven by initiatives like Operation Chokepoint 1.0 and 2.0, meticulously engineered during the Obama administration and refined under Biden. These initiatives have notably constrained many legal business sectors, including cryptocurrency companies, from opening U.S. bank accounts.

Furthermore, the forthcoming Markets in Cryptoassets (MiCA) regulation in the European Union will mandate Centralized Exchanges to monitor all crypto asset transfers exceeding €1,000 by 2024-2025. Additionally, this law will impose a daily transaction cap of €200 million for private stablecoins like USDT and USDC.

The unstoppable ascent of the decentralized blockchain ecosystem is undeniable. However, unless one envisions a global crypto revolution where most businesses adopt Bitcoin or Monero for everyday transactions (a prospect not on the immediate horizon), the value of a token becomes little more than the pixels on a computer screen.

In the near future you may be able to acquire Ethereum in a heavily regulated environment, yet navigating bureaucratic hurdles and facing substantial taxes when liquidating your Ethereum holdings could potentially yield only a fraction of your initial investment.

So, what’s the solution?

Some contend that decentralized exchanges (DEXs) will eventually match the speed, efficiency, and user-friendliness of centralized counterparts while retaining the advantage of being less susceptible to regulation due to their decentralized nature. Although I would beg to differ on the last point, once again, we confront the issue of on and off-ramping one’s cryptocurrency holdings.

Decentralized peer-to-peer markets like LocalMonero or Bisq, while offering unique benefits, suffer from extremely low liquidity. Additionally, the accessibility of crypto-to-commodity trading remains a challenge for the average institutional client unless they have connections to alternative markets.

Centralized Exchanges should consider a pivot towards equipping clients with the right legal entities, enabling them to lawfully sustain trading services in restrictive jurisdictions through foreign corporate trading accounts. However, it’s worth noting that even this approach might offer only temporary respite, as new legislation can swiftly emerge, prohibiting such practices within a matter of days.

Given the aim of establishing a resilient solution for traders, it becomes imperative to account for geopolitical realities when transitioning current account holders and their assets to a favorable jurisdiction. Many cheaper offshore destinations seem to possess the strongest asset protection and privacy legislation for companies. Yet, in practice, the country lacks the capability to properly hold and safeguard confidentiality and assets. Legally, these are called “paper entities.”

A common example is Belize, where for as little as $2,500, one can form an LLC and open a bank account. Nevertheless, in practical terms, Belize collaborates closely with American banking institutions, and corruption is widespread, making it possible to compromise nominee service guarantees for a price.

In summary, the key concept here is to establish legal entities and open bank accounts in jurisdictions that minimize the risk of foreign interference or intervention. This is why locations such as the Cook Islands, known for their geographic isolation, command a premium for trusts and companies. Additionally, it’s crucial to separate your company and bank account across different jurisdictions. This separation acts as a safeguard against potential threats, such as a Mareva injunction, which freezes assets, or the forced dissolution of the company.

For maximum privacy, cryptocurrency transactions should be conducted through a corporate account.

More advanced solutions may incorporate agent and trustee services, founded on the principle that what one does not own cannot be taken away from him. Such strategies also enable clients to distance themselves from Know Your Customer (KYC) requirements tied to their personal name.

The overarching goal for crypto exchanges should be a holistic approach centered around strong asset protection and giving the client maximum control. While implementing this approach may require a certain initial capital investment from users, it remains a viable strategy to secure market share in the trading industry. Most importantly, this approach serves as a significant stride in the right direction. It acknowledges the inherent conflict between an exchange’s business model and the interests of entities such as the Bank for International Settlements (BIS), central banks, SIFIs, and broader geopolitical considerations.

By taking tangible steps to enhance asset protection, bolster cryptocurrency privacy, and safeguard confidentiality, cryptocurrency exchanges can navigate digital age restrictions more effectively.

For a deeper consultation on wealth management strategies and actually implementing them, feel free to reach out via email at

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