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Bitcoin – The Evolution of Bank Collateral

I recently stumbled upon a heated discussion among Monero community members regarding Bitcoin. They couldn’t comprehend why Michael Saylor kept promoting this “ponzi scheme” and fully supported Jamie Dimon’s comparison of Bitcoin to a “pet rock.” They argued that, with the hard fork of XMR, Bitcoin essentially had little to no use case. After all, Satoshi’s promise of ending banks and the dollar’s global hegemony seemed to have lost itself in the headwind, with stablecoins dominating the vast majority of blockchain transactions. They couldn’t believe that the SEC labeled Bitcoin as a commodity and doubted the intentions of major financial institutions embracing this “anti-bank” crypto with the launch of ETFs.

To this day, I still do not believe that Bitcoin was magically “engineered” by one cryptographer with pure intentions for the world to debank themselves. In fact, it is common knowledge that “Satoshi Nakamoto” did not invent Bitcoin; rather, he wrote the whitepaper for Bitcoin. Since there were only 400 cryptographers at the time, it is very plausible that the intelligence services know very well who created this “digital store of value.” Previously, I underlined Dan Kaminsky’s discoveries and Benjamin Wallace’s speculation on Nakamoto’s potential ties to British and American intelligence agencies. These claims do leave a large unanswered question: if Bitcoin were invented by state-sponsored actors, then what was the problem it was trying to solve?

Bitcoin promised to liberate the hurting population from banks – yet banks have only got larger.

Returning to the backdrop of Bitcoin’s launch, the year 2008 marked one of the most significant monetary crises the world had witnessed in over seven decades. In my article, “Wealth Management in Reset Times,” I delve into the notion that this crisis wasn’t merely the bursting of a “housing bubble,” as portrayed by mainstream media; its repercussions were far-reaching. It teetered on the brink of unraveling the entire Eurodollar system, a framework that had propelled global prosperity since the 1960s. Then, out of the blue, Bitcoin emerged, boldly pledging to “destroy central banks” and “eliminate the need for dollars.” What many failed to grasp at that moment was the intricate connection between Bitcoin, and frankly all cryptocurrencies, with conventional banking. Far from being a disruptive force seeking to obliterate the banking system, they emerged as tools to refine and fortify the existing Eurodollar structure.

The once fervent belief that “Bitcoin will triumph because the dollar is doomed” touted by Bitcoin maximalists turned out to be nothing more than a mirage. In reality, it has facilitated the creation of more Eurodollars, operating in stark contradiction to the prophecy. To underline this point, let’s examine the best-known case of Bitcoin adoption- El Salvador’s decision to embrace Bitcoin as legal tender in June 2021. At that time, the country was grappling with a plethora of issues—decaying infrastructure, rampant crime making it the murder capital of the world, and President Bukele striving to bring order. “In the short term, this will generate jobs and help provide financial inclusion to thousands outside the formal economy,” remarked Bukele in a video showcased at the Bitcoin 2021 conference in Miami.

However, a less-publicized event occurred three months prior to Bukele’s announcement. In March 2021, El Salvador officials found themselves in Washington D.C., imploring the IMF for a billion-dollar bailout, a colossal sum for this small nation.  The reason behind this plea was straightforward- they did not have enough dollars, a major issue if your entire economy runs on the dollar. The introduction of a dollarized economy in 2001 had initially brought prosperity, with offshore banks generously lending to businesses left and right. However, the 2008 crisis reversed this scenario, leading to a decade of economic hardships for numerous Latin American countries, including El Salvador. Dollar reserves dwindled over the years, and in 2019-2020, the country even halted reporting its reserves for an entire year. When reporting resumed, the reserves had fallen below the IMF’s “predetermined short-term net drains,” essentially the Eurodollars that El Salvador owed to other countries.

Faced with an IMF refusal of the loan request, El Salvador was on the brink of potential economic collapse, similar to Argentina during the “Coralito” debacle in 2001. In a surprising turn, President Bukele sought an innovative solution to replenish the draining dollar reserves—using Bitcoin as collateral. Similar to collateralizing a U.S. treasury, he showcased an innovative approach to the world’s indebted nations, demonstrating how cryptocurrencies could be used to access Eurodollars. The myth that this move was a challenge to the world’s financial hegemony is dispelled by the fact that Bukele, unlike the Presidents of Haiti, Tanzania, or Burundi, all who mysteriously died in 2021, has not faced assassination or a U.S. backed coup. I invite curious readers to investigate the common denominator preceding the deaths of these other leaders.

As explored in my previous article, for the past 70 years, the vast majority of money is created out of thin air by private banks in the form of credit. This exponential growth persisted until August of 2007, and since then, bank balance sheets have maintained a sideways trajectory, resulting in a dollar shortage. Contrary to the commonly accepted narrative that the Federal Reserve’s monetary policy influences the amount of dollars in circulation (popularized through memes like the Fed going “brr”), it’s crucial to recognize that money is, in fact, created by private banks, not the U.S. Central Bank.

Operating under the premise that banks essentially create money out of thin air, a closer look at the volume of loans granted by banks reveals a significant contraction, especially in the aftermath of the 2008 crisis. Faced with the risks associated with lending to potentially unstable businesses, instead of fortifying their lending criteria, banks shifted their focus to the less risky yet more lucrative financial sector. Why extend loans to businesses when more profits could be made trading derivatives? The consequence? A dire shortage of Eurodollars.

In the contemporary landscape of our financialized economy, a pressing question emerges – how can we generate more Eurodollars if banks have significantly curtailed lending?

When an individual borrows from a bank, they typically provide collateral, such as a car. However, imagine obtaining a loan against the same collateral while the car is lent to a friend. Instead of pledging the physical object, one offers a claim on the car, represented by an IOU. While traditional banking might dismiss the IOU as unreliable for the average person, in modern banking, this is precisely how 98% of money is created.  

Consider the scenario where HSBC lends a treasury note to Barclays. HSBC holds only a claim on that note—an IOU where Barclays promises to return the Treasury along with interest. The next day, JP Morgan approaches HSBC seeking to also borrow a treasury note. While HSBC no longer physically possesses the note, having lent it out the previous day, it can still inform JP Morgan, “I don’t have the actual Treasury, but I hold a claim on it.” In the Eurodollar realm, this “claim” serves as acceptable collateral, which explains why JP Morgan readily accepts it. JP Morgan can then proceed to re-lend this claim on a Treasury to another financial institution, such as a hedge fund.

This concept closely resembles a blockchain ledger. Consider the scenario where JP Morgan wishes to settle the loan initially borrowed from HSBC. Instead of returning a physical Treasury, JP Morgan deducts the owed amount from a future transaction where HSBC is the debtor. Suddenly, we find ourselves in an inter-bank lending network, where none of the actors realistically expect to get back their original Treasury bill. All that’s required is to settle the accounts, hence why banks are essentially glorified bookkeepers.

This process of relending claims on dollars can occur sometimes up to 40 times, which in banking terms is called “rehypothecation”. For the average person, this resembles a form of degenerate gambling, akin to the risky crypto traders who leverage 40x on margin. Now, picture the fate of the crypto trader whose collateral, initially posted in margin, loses value—or worse, is no longer accepted. In such a scenario, they must scramble to provide different, more secure collateral, or face the risk of losing their entire investment in a margin call.

In the broader financial landscape, numerous businesses adopt a similar strategy, borrowing against assets and utilizing the borrowed funds to cover employee salaries and operational expenses. Take, for instance, the FTX scandal, where the company leveraged their own FTT tokens to secure substantial loans, not only for payroll but also for the acquisition of other crypto businesses and tokens. This strategy thrived until the FTT tokens started losing value and were eventually no longer accepted as collateral by lending institutions. Sam Bankman Fried didn’t have pristine collateral to bail his company out, and thus a multi-billion-dollar crypto exchange crumbled in less than 48 hours.

This mirrors the events of 2008 when financial institutions like Lehman Brothers found themselves in a bind as their Mortgage-Backed Securities (MBS) ceased to be accepted in the Repo market. Suddenly, highly indebted businesses faced a cash crunch, unable to secure overnight funds for operational expenses – similar to FTX. The only way out was to provide better collateral, such as treasuries (“pristine collateral”), or risk being cut off from borrowing altogether.

This is precisely why we experienced a Monetary Crisis—there was a shortage of “pristine” collateral. Almost miraculously, Bitcoin emerged from the 2008 crash, touted as the best “store of value” on the market.

The point is, for the Eurodollar scheme to keep growing, it constantly requires new collateral to generate loans, preferably of the “pristine” variety. One method to acquire it is through wars—plundering new resources, such as Iraqi oil fields or Ukrainian gold reserves, serves as recent examples. Wars also facilitate new debt issuance, i.e., government bonds, considered the pinnacle of collateral in this complex financial ecosystem.

Bitcoin and cryptocurrencies, in general, introduce a fresh perspective on flexible collateral. The first notable aspect is their public nature, allowing for complete transparency in tracking each coin and transaction. This transparency enables financial institutions to anticipate collateral shortages, providing a level of preparedness in case certain borrowers show signs of instability.

Secondly, the widely debated concept of Bitcoin as a “store of value” is a prevalent topic in the blockchain community, though debunked by Caitlyn Long, who introduced the term “paper Bitcoins.” Following Binance’s initiation of Bitcoin futures and options trading in late 2017, the assumption that “only 21 million Bitcoin” exists is proven false. These contracts essentially represent promises from intermediaries, such as exchanges, to deliver actual Bitcoin. Without holding the private keys, one doesn’t actually possess the Bitcoin but rather a claim to it—an IOU. Does this ring a bell from the rehypothecated Treasury Bills?

According to this chart, approximately 14% to 20% of Bitcoin’s supply is diluted through paper derivatives. This will most likely increase with the introduction of ETFs.

Consequently, significant institutional players like JP Morgan can short Bitcoin without holding a substantial supply of the underlying asset. The volume of Bitcoin derivatives surpasses the actual Bitcoin available in the market, a trend likely to intensify with the recent approval of a Bitcoin ETF by the SEC. The objective is to generate more Eurodollars through the issuance of synthetic Bitcoin.

In conclusion, Bitcoin and other cryptocurrencies provide a solution to the Eurodollar system’s collateral shortage. When figures like Jamie Dimon dismiss cryptos as a “complete side show” or liken them to “pet rocks,” it sounds more like the pot calling the kettle black, considering blockchain ledgers directly challenge the banking business model—just another system of ledgers. Jamie seems to suggest that JP Morgan will only support cryptocurrencies issued and controlled by the bank, similar to today’s private stablecoin companies such as Tether or USDC.

To track interbank settlements and ensure each bank’s balance sheet matches, stablecoins are likely to evolve into the de facto CBDC (Central Bank Digital Currency) for the United States and possibly the world. The lines between the private and public sectors are already blurred, with Tether recently involving the CIA and FBI in blacklisting certain addresses. However, the challenge for banks lies in the 1 to 1 ratio of reserves required by stablecoins, contrary to the current fractional reserve banking model. The future may involve synthetic deposit security tokens, akin to paper Bitcoin, allowing banks to rehypothecate customer deposits while ensuring transparent tracking.  For those intrigued by this topic, I highly recommend exploring DTCC’s partnership with R3 to develop digital versions of T-Bills, aiming to decrease settlement failure rates.

Is the Bitcoin ETF good or bad news? While the obvious answer for the average investor may be positive due to an influx of institutional money, it’s crucial to consider the potential manipulation, similar to what has occurred in the gold market for over a decade. Personally, I believe Bitcoin could reach up to $1 million per coin, but two possible problems linger: will the average investor be able to cash out, or will the market be restricted to accredited investors only via digital identities and centralized exchanges? And secondly, how much purchasing power will that million dollars afford you? Perhaps not much more than what one Bitcoin can buy you today…

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Wealth Management in Reset Times

Inflation is on the rise. The world is at war. Governments are borrowing more money than ever. An increasing number of people are starting to realize that traditional investment strategies, such as debt instruments and pension funds, are actually losing them money. The old concept of ‘sit and earn,’ where wealth is confined to a stagnant wealth management advisory plan, does not work anymore. In this article, we explain in great detail the origins of the monetary problem, where the current situation is heading, and discuss solutions that you can implement to protect yourself in Reset Times.

The Eurodollar System: Unveiling the Need for New Collateral

The Eurodollar system emerged as a workaround to the limitations of the Bretton Woods monetary system established after World War II. Under the Bretton Woods System, gold was the basis for the U.S. dollar and other currencies were pegged to the U.S. dollar’s value. The problem was that in the wake of the war destruction, the sheer amount of money needed to rebuild Europe and initiate globalism was so large, that for the United States to service such demand would mean devaluing the dollar out of existence. This is known as Triffin’s Paradox, a dilemma where a country issuing the global reserve currency must supply the world with enough of its currency (in this case dollars), leading to potential economic imbalances and conflicts of interest.

In response, the City of London orchestrated the collaboration of private commercial banks in Europe to establish the Eurodollar system i.e. “ghost money system”. This system, rather than functioning like a traditional currency, operates more akin to a telecommunications network or a ledger. The Eurodollar system made money creation more efficient by combining the processes of creating money and facilitating transactions. In essence, it operates similarly to bookkeeping, where dollar claims are traded between banks and recorded like an accountant keeping track of who owes what to whom. In essence, it resembles bookkeeping, with banks trading dollar claims and maintaining records like an accountant keeping track of debts.  For instance, if HSBC owes one million dollars to BNP Paribas, instead of an immediate repayment, BNP deducts the owed amount from a future transaction with HSBC—a simple ledger entry, just like in a blockchain. Banks were able to fuse the money creation function with the intermediation function. The problem of scalability remained. Bankers acceptances was the limiting factor.

U.S. treasuries became a preferred form of collateral for foreign lenders due to their high liquidity, providing a level of standardization that reduced the need for extensive knowledge about the other side of the trade. If a business needed a loan, all they had to do was show their U.S. Treasury, and a bank would give them the loan. These U.S. claims are also called “pristine collateral”. Contrast this with the old system based on unsecured transactions and the need for specialized knowledge of each business field. Now private commercial banks could use their U.S. dollar claims and treasuries to lend to other banks, forming a global interbank lending network. Banks worldwide, having extra cash, wanted to invest it. This led to the creation of a network where these banks could take in deposits denominated in foreign currencies, “swap” them into dollars, and then use these dollars for investments. In other words, the dealer banks were able to mass produce money outside of confines of Bretton Woods that is physical currency.

By 1971, the Eurodollar system had surpassed Bretton Woods, averting a financial collapse when the U.S. abandoned the gold standard. In 1981, a financialized economy, featuring fiat money and a 40-year interest rate downturn, emerged, necessitating exponential Eurodollar growth for stability. With its intricate interbank lending system, even a minor default could send ripples across the entire market. This is where the Repo (repurchase agreement) markets took center stage as lenders of last resort. Money market funds, flush with cash, extended loans to hedge funds, traders, and banks in exchange for collateral. While they preferred U.S. treasuries (considered the most pristine collateral), they also accepted other securities such as foreign debt or Mortgage-Backed Securities. Problems arose when the Repo market’s acceptable collateral shrank, as seen in 2008 when mortgage-backed securities ceased to be accepted. Naturally, with fewer options for accepted collateral, a shortage of pristine collateral ensued. The lack of overnight lending left overleveraged businesses unable to cover day-to-day operating expenses, triggering the 2008 Monetary Crisis that was basically a massive global dollar shortage due to freezing credit markets.

Ever since 2008, the Eurodollar market experienced a huge wakeup call, where banks stopped lending at the same scale as pre-2007. In all Eurodollar instrument charts, lending between 2008 and today has slowed dramatically, which severely contrasts pre-2007 and the exponential rise in foreign exchange derivatives. This shift challenges the notion of sustained easy money. The data reflects a notable change in the trend after 2008, suggesting that money and credit were not generated at the same accelerated rate as witnessed in the years leading up to the financial crisis.

The Eurodollar market’s growth relies on a continuous expansion of lending by banks. However, ever since 2007 many financial institutions stopped partaking in riskier collateral, only accepting pristine collateral such as U.S. treasuries. Without more lending, economic growth can only be sustained by massive government borrowing. The constant expansion of the U.S. debt market is crucial for preventing a collapse in the Eurodollar system due to lack of acceptable collateral.

To secure additional collateral, most of the time those in power have deliberately initiated endless wars. The latest iterations are conflicts in Ukraine and Israel. Each military involvement serves as a convenient pretext to issue more government bonds, increasing the overall debt in circulation. This influx of debt contributes to expanding the pool of high-quality collateral within the markets. Wars tend to be inflationary by nature and also offer an opportunity to acquire a nation’s gold and natural resources, which can later be used by global western banks as valuable collateral. We expect the next decade to be characterized by conflicts on multiple fronts, which will serve as an excuse for governments to pursue stealth quantitative easing.These wars have been and are kinetic. There is another way for banks to get additional collateral when push comes to shove during the crisis.

The Great Taking

The second maneuver is popularly referred to as the “Great Taking”, wherein central banks seek to seize and control various financial assets, bank deposits, stocks, bonds, and underlying properties of the public through engineered crises. Debt-ridden assets will be confiscated, similar to the events of the Great Depression. In the 1930s, when 9,000 U.S. banks failed, taking $7 billion in depositors’ assets with them, only the Federal Reserve-backed banks survived. However, the depositors’ debts in the banks that went out of business were not canceled; instead, they were consolidated into the Federal Reserve-backed banks and enforced.

In the past, one used to receive physical stock certificates, tangible proof of ownership of shares. However, stock certificates have become obsolete, replaced by mere digital entries held with brokers. Despite the presence of SIPC insurance, which is limited, and FDIC coverage for insured deposits (up to $250,000), the legal claim over the securities with a broker is questionable. Just like with bail-ins, you do not have a legal claim over the securities that you own.

In the 1960s, the dematerialization trend phased out traditional paper securities, introducing an order book/ledger system. This transition led to a fundamental change in the understanding of ownership, moving towards entitlement. A subsequent development involved establishing a system where custodians and clearinghouses hold your shares; notably, these entities operate without regulation and lack collateral. Securities, held with an entitlement claim rather than outright ownership, are then pooled together as collateral for various investments, with a primary focus on derivatives. It’s important to note that this intentional setup could serve as a mechanism for a deliberate devaluation or a rug-pull of securities.

In the next phase of the Great Taking, the focus shifts towards control over food and health. The strategy is clear: by obtaining access to food and energy sources outside the conventional banking system, individuals can survive outside of the traditional banking system. This is why weaponized virtuous movements such as the environmentalists and health mandates are designed to remove people from their farmlands and forbid them access to natural medicines.

During the upcoming Hegelian engineered crises, individuals will be coerced under the pretext of safeguarding these systematically crucial financial institutions (SIFI), arguing that without such banks, restarting the economy would be impossible. Every financial bubble has brought in more repossessed wealth to the ultra-rich, taking the assets away from anyone not in the 0.1 percentile. It’s akin to a Monopoly game where all pieces and money are reclaimed by the bank, and then starting a new game. Beginning afresh, the narrative becomes one where they possess everything, and you have nothing—would you like to borrow something?

This scenario mirrors what the central bank digital currency (CBDC) represents. It becomes extremely challenging for people to resist using it, given the essential nature of basic needs. Imagine an app available for download—the cavalry coming to the rescue. By downloading this app, you can load your phone with digital currency, enabling you to purchase necessities like water. However, each usage entails borrowing money from the system, creating a subtle but impactful dependency. They may even provide a “free” initial CBDC offering, which will be a Central Bank loan disguised as Universal Basic Income.

So, what are the solutions?

For starters, individuals in the stock and crypto markets should significantly deleverage. In many cases, it is more prudent to sell digital assets and invest in tangible wealth, such as real estate, land, precious metals, and portable art, rather than keeping money in a bank, stocks or NFTs that one does not own. Plausible scenarios, such as international power outages or a cybersecurity hack affecting financial institutions, could wipe out one’s trading portfolio, assuming that a margin call doesn’t do it for them.

However, this does not mean to complete disregard for traditional investments. In fact, contrary to public opinion, having a stake in U.S. dollars may be the best option from all liquid vehicles.  The notion of BRICS nations trading energy outside the US dollar is frequently discussed, but the success of dedollarization initiatives may be overemphasized. While there is a desire to dedollarize, the ability to achieve this seamlessly is often exaggerated. Dedollarization will happen out of need, not desire. Historical trends show that the dollar tends to strengthen during crises because of the global dollar shortage (such as in 2008 and during the Covid pandemic) and then weaken afterward. However, this is not necessarily indicative of the end of dollar hegemony.

In times of crisis, such as the events of 2008 and the Covid pandemic, the US dollar typically experiences an initial rise followed by a subsequent fall post-crisis. This could easily happen again in the near future. However, it is crucial to understand that this does not mean the end of dollar hegemony; instead, it reflects that the existing system continues to work. During periods of dollar weakness, countries, corporations, and individuals often choose to issue more dollar debt instead of paying it down, driven by the high demand for dollars. For the collapse of dollar hegemony to occur, countries would need to seize the opportunity presented by the weakened dollar to pay down their dollar debt, which is a very rare occurrence nowadays. Even if dedollarization were to take place, it would be a gradual process rather than an overnight phenomenon.

This does not mean you go all into U.S. equities or dollarized assets. It does mean however, that when it comes to a cash position, the dollar has outperformed most other currencies in both the Global Monetary Crisis of 2008, and the Covid Pandemic in 2020.

Similarly, the bond markets are expected to function for at least the next three years, primarily because if the United States defaults on its debt, the last concern would be the treasury market. Such a default would signify the collapse of the entire Eurodollar market and the global economy. One of our suggestion is to consider floating rate notes (FRNs), which are bonds with an interest rate that is not fixed but adjusts periodically based on the prevailing interest rate. If the premise is that there will be more debt issuance to prop up the current system, it is logical to assume that interest rates will rise as the value of government debt falls unless a demand destroying event occurs and causes panic buying of Treasuries and their global equivalents resulting in opposite short term outcome. However, it’s crucial to note that this strategy is effective only in the short term, especially before entering a hyperinflationary depression, as the FRN rate may struggle to keep pace with higher inflation rates.

When it comes to the underlying solution, any investment that makes people less dependent on the government and thrive in an off-grid environment is a safe bet. Stock up on non-perishables, buy real estate with land and a water source, have home energy storage system designed for the whole house and focus on general self-sufficiency for the best long-term results. Since accomplishing all of this alone is impossible, one will need to implement loan contracts for a supply of goods or services over a fixed period and build a community based on the exchange of goods rather than fiat monetary value. An example would be investing in your neighbor’s upstarting chicken coop; instead of asking for a monetary return, negotiate a supply of eggs over five years. Similarly, investing in crops, plants, children’s education, or tools and knowledge fits the definition of an investment—what you invest will yield more in the future.

Finally, whatever you own should be moved off your balance sheets, structured out of your own name, and preferably tied into a kinetic tax structure. The first thing that governments have access to is their own tax reporting data, and no one wants to have their properties showing up in databases in their own name. Asset protection solutions allow you to continue operating in the digital economy without having to give up your privacy or security.

In conclusion, the Eurodollar ghost money system requires more collateral, and the tokenized economy through future Central Bank Digital Currencies addresses this concern. Many pundits argue for complete disconnection from the grid, avoiding all involvement with future technocratic systems. At Coins Without Borders, we believe this is not a sustainable long-term solution because certain services and products cannot be handmade, making it an impractical way to live. Our goal is to harness the best of both worlds – we guide you on how to maintain collaboration with financial institutions while embracing an off-grid lifestyle, securing personal freedom for you and your family.

For more on wealth management strategies and actually implementing them, feel free to contact us at info@coinswithoutborders.com

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The Crypto Privacy Portal

Buying Wealth Anonymously
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While many of us today understand that Bitcoin isn’t as anonymous as some once believed, it wasn’t always the case. Back in 2013, a significant scandal unfolded when the FBI seized Silk Road, the largest dark web marketplace. This marketplace was designed for users to buy and sell products and services anonymously, with Bitcoin serving as the primary means of exchange. Unfortunately, it soon became clear that the trail of Bitcoin addresses could be traced back to real individuals, primarily due to the introduction of credit card payments for Bitcoin transactions.

The concept of Bitcoin as a ‘private cryptocurrency’ was debunked early on. In the early years, around 2009 to 2011, when Bitcoin transactions were primarily peer-to-peer, it did provide a level of privacy. Sellers and buyers would arrange public meetings where one party would send their Bitcoin, and the other would make the payment directly in cash or through a wire transfer. However, in today’s landscape, with centralized exchanges requiring face scans and biometric KYC documentation, it’s evident that Bitcoin, like most other cryptocurrencies, can be easily tracked.

The most private transaction involves the buyer paying in cash, while the seller transfers crypto to a cold wallet.

Many wonder how this transition occurred, turning what was once envisioned as a decentralized, peer-to-peer network into its current state. The mystery surrounding Bitcoin’s origins has raised numerous questions, particularly regarding the identity of Satoshi Nakamoto. Some intriguing speculations suggest that digital currencies, such as Bitcoin, might have been strategically introduced as a Trojan Horse by intelligence networks. The aim? To secure support from libertarian circles and ultimately promote centralized digital currencies. These theories, fueled by Dan Kaminsky’s discoveries and Benjamin Wallace’s propositions, hint at Nakamoto’s potential ties to British & American intelligence agencies.

Whatever the true origins for Bitcoin may be, it doesn’t take much to see the future vulnerabilities and privacy concerns of this asset class.

Bitcoin Maximalists often emphasize that only 21 million Bitcoins can ever enter circulation. However, as Caitlin Long points out, the existence of “paper Bitcoins,” represented by futures and options contracts, can result in an infinite number of Bitcoin derivatives. These contracts essentially stand as promises from intermediaries, like exchanges, to deliver actual Bitcoin. Unless you hold the private keys, you don’t truly possess Bitcoin; instead, you have a claim to Bitcoin, essentially an IOU. Consequently, significant institutional players such as JP Morgan can short Bitcoin without needing to hold a substantial supply of the underlying asset.

According to this chart, approximately 14% to 20% of Bitcoin’s supply is diluted through paper derivatives.

Likewise, the most direct approach to dictate what you can or cannot buy involves controlling the entry and exit points for cryptocurrency and fiat transactions, many of which pass through centralized exchanges. A case in point is how exchanges can delist tokens with a simple click, exemplified by Binance’s removal of certain privacy coins in France, Spain, Italy, and Poland.

Suddenly, many individuals find themselves compelled to resort to decentralized exchanges (DEXs) as alternatives for moving funds anonymously. While some DEXs do offer efficient ways to purchase cryptocurrencies using debit cards, converting your cryptocurrency back into traditional currency can often be a complex process. Platforms like LocalMonero or Bisq, despite providing enhanced privacy, frequently face challenges related to low liquidity. Here’s an illustrative guide to highlight the level of difficulty involved in completing an anonymous transaction via decentralized off-ramping alternatives like Paxful or LocalMonero:

  1. Always access LocalMonero using a VPN or Tor.
  2. Register using a disposable email like Protonmail or guerrilla mail. Avoid using your real email, address, or name.
  3. Find a trustworthy seller/buyer on LocalMonero for a cash trade. Sellers/buyers with good feedback and high reputations are safer.
  4. Use a public phone or a burner phone to coordinate the meeting.
  5. Select a public meeting place where you have access to free public Wi-Fi.
  6. Arrive at the venue, complete the transaction, and wait for 2-3 confirmations.
  7. Avoid using your personal vehicle to commute, as your vehicle’s registration can reveal your identity.

It’s important to note that as of this moment, all of these methods are completely legal, yet unless you are a privacy geek or a low-ranking drug dealer, chances are that you will not go through this much of a hassle. The key message here is that, until a reliable solution for crypto-to-commodity trading becomes available, most major transactions will still involve centralized exchanges like Binance, whether we like it or not. The question that lingers is whether one can still off-ramp anonymously, and I believe it is possible.

First and foremost, take a look at my previous article, which highlights the necessity of creating a centralized exchange account without disclosing your personal information through Know Your Customer (KYC) procedures. Without this crucial step, the subsequent actions won’t have much meaning, as all transactions from the exchange to a business bank account will be linked to your personal ID documents.

Once you’ve laid the foundational framework, the next step is to either receive crypto payments anonymously or anonymize payments coming from centralized exchanges. A common mistake made by beginners is purchasing Monero on Binance and then sending it to someone else, believing the transaction is private. Spoiler alert- it’s not.

In my view, the simplest approach involves buying Bitcoin on a well-known exchange such as Binance, then moving it to a KYC-free exchange like TradeOgre, where you can exchange Bitcoin for Monero. Afterward, transfer the Monero to a cold storage wallet. From there, you can send it to your recipient’s exchange wallet, whether it’s Binance, Kucoin, or Kraken, and they can then convert it to traditional currency with maximum privacy, using their corporate account. This strategy is both straightforward and cost-effective when combined with Tor and a VPN. However, for those looking for even greater discretion, there are various methods to enhance anonymity.

An illustration of the aforementioned method.

One common option involves mixers and tumblers, which can be explained using a simple analogy. Imagine you have a plastic cup and a collection of pennies from both your wallet and your friend’s wallet. Now, pour all the pennies into the cup and give it a good swirl. Afterward, return to each person the same number of pennies they initially contributed. However, the individual coins they receive will likely be different from the ones they initially gave. This is precisely what crypto tumblers and mixers do, whether you’re dealing with Bitcoin, Ethereum, or stablecoins.

At the time of writing this article, all of the forthcoming methods mentioned are completely legal, even though Tornado Cash was shut down by the Treasury in August 2022. However, my concern with coin mixers, like Tornado Cash (TORN), is that the coins they process are “tainted.” In simpler terms, it’s still possible to trace that these coins have undergone mixing in a mixer. The blockchain’s inherent transparency, storing all transaction information on a public ledger, compromises the level of privacy. This is precisely what led to the freezing of USDC that had been processed through TORN. Exchanges meticulously examined the transaction history and refused to accept any USDC that had passed through the Tornado Cash Dapp. Circle, the company behind USDC, went even further by freezing USDC from blacklisted addresses associated with the app.

To address this issue with coin mixers, one potential solution is to introduce a delay in payments. However, it’s important to note that this method is effective primarily for cryptocurrencies that prioritize user privacy, such as Monero. The postponed payments feature allows users to delay the transfer of their anonymous coins for a specific duration, which can range from a few hours to several days, depending on the specific mixer used. The primary purpose of this delay is to significantly complicate the efforts of blockchain experts attempting to trace the origin and destination of these coins.

When a user opts for a mixer offering postponed payments, their coins are temporarily held in a pool for the designated delay period. During this time, the mixer can merge these coins with those from other users, creating a larger pool of anonymized coins. Once the delay period comes to an end, the mixer then distributes the mixed coins to their intended destinations.

By introducing this delay in coin transfers, mixers can effectively thwart blockchain analysts from tracking the path of these coins.

A more effective but somewhat expensive method is called chain hopping. The idea behind chain hopping is to add an extra layer of security to the mixing process by not relying on a single blockchain network. Instead, the mixing service uses multiple blockchain networks and hops from one network to another to blend the funds. This technique makes it challenging for anyone to trace the funds, even if they know the initial source of the cryptocurrency.

In layman terms, imagine you’re driving a car on a highway with multiple exits, switching from one highway to another and changing your vehicle’s appearance along the way, say at a parking lot.

First, you pull over to a parking lot (a different wallet) on the same highway, where you exchange your unique car (convert your cryptocurrency) for a new one (a different cryptocurrency). Then, you re-enter the highway, but now you’re driving an entirely different car (using a different blockchain network). This new car is unrecognizable compared to your original one.

Now, even if someone had spotted your initial car and noted its details, they won’t be able to follow you on this new highway because you’re driving an entirely different vehicle. In a real-world scenario, exiting the highway with a new car would be challenging due to toll booths recording your entry and exit. However, crypto cross-bridges have addressed this issue, allowing your “new car” to smoothly transition to a different road. Chain hopping makes it exceedingly challenging for anyone to track your journey from start to finish, just like taking different highways and switching cars along the way would make it nearly impossible for someone to follow you throughout your trip.

The final method I’d like to share is “peel chains” or payment splitting. This technique breaks down a large transaction into smaller ones sent to different addresses to make it more challenging for anyone to trace the funds’ origin and destination.

To explain payment splitting, think of it as someone sending a secret message in World War Two through multiple postcards. Imagine you have an important message (representing a large transaction) that you want to send to the Resistance without anyone knowing the full content or its destination. Instead of writing the entire message in one letter, you break it into smaller parts and send each part on a separate postcard.

For instance, if you had a 10-part message, you would send each part on a different postcard to various addresses (similar to how a mixer splits a transaction into multiple smaller transactions sent to different addresses). This approach makes it much tougher for anyone to piece together the full message or track its route.

The advantage of payment splitting is that it adds an extra layer of security and privacy. Even if someone were to intercept one postcard (or one transaction), they would only have a fragment of the complete message (or payment), making it nearly impossible to figure out the entire story or where the remaining parts went. The downside is the cost, as you must pay a “stamp fee” (transaction fee) for each postcard sent.

For the time being, Monero (XMR) stands as the top choice for cryptocurrency trading. It eliminates the need for relying on chain hopping or mixers to anonymize crypto transactions. Unlike many other tokens, its value comes from its practical use rather than mere speculation. However, in the long run, the possibility of a government ban on Monero looms, with the IRS offering a substantial reward of $625,000 for breaking XMR’s code. If all centralized exchanges are compelled to remove it, using Monero will become more burdensome and costly.

In conclusion, the cryptocurrency landscape is in constant flux, demanding more advanced methods in the future. My primary concern regarding the techniques I’ve outlined is their dependence on centralized exchanges. Should a bottleneck emerge in exchanges like Binance, Kraken, or Kucoin, entering and exiting the cryptocurrency realm will necessitate fresh approaches. This is why the community’s long-term strategy involves developing an off-ramping solution involving commodities, tangible goods, or service trading.

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

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Escaping the Digital Gulag

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Recent saturation of the entire news media with border crises, such as the Israel-Gaza war, the influx of Hispanic migrants into America, and the European migrant crisis, has drawn public attention. Border patrol agents cutting razor wire to allow migrants to enter sounds like a bad comedy. People are actively taking sides, whether they support “pro-Israel” or “pro-Hamas,” “open-borders” or ” kick out the migrants.” It almost seems like the Hegelian dialectic at play… a problem, which riles up a reaction, followed by a cure “to save the day”.

Border guards doing what they always do… cutting border fences.

So, what will that “treatment” be?

Not long ago, I came across two informative videos by James Corbett and Truthstream Media. They delve into great detail to elucidate how the ongoing border situation is being manipulated to promote the concept of a biosecurity state, albeit with a different approach. This scheme is tailored for those who resisted the imposition of unconstitutional health certificates during the COVID pandemic; now, they are the ones who might find themselves advocating for a biometric ID to facilitate cross-border movements.

Joe Biden, who based his campaign on the promise of no additional border wall construction during his administration, has suddenly granted waivers for 26 federal laws in South Texas, allowing for the erection of approximately 20 miles of supplementary border wall. This has been made possible by utilizing funds from Trump’s executive order, which was originally intended for his “travel ban.”

Buried within the details of Trump’s well-known Executive Order titled “Protecting the Nation from Foreign Terrorist Entry into the United States” (Section 8) is a provision for the implementation of a biometric entry-exit tracking system, affecting all individuals entering and leaving the United States. This despotic desire to implement a biosecurity border protection system goes all the way back to Trump’s golfing buddy President Clinton, who in 1996 signed the Illegal Immigration Reform and Immigrant Responsibility Act into law, which mandated the inclusion of a biometric identifier at the country’s borders.

“That means the U.S. government would have to install equipment that would either fingerprint or iris scans on everyone entering and leaving the United States”- Collins

This development coincides with a recent announcement from the European Union, stating that starting in January 2024, American citizens visiting the European Union will face the same intrusive biosecurity checkpoints they had imposed on foreign visitors at their own borders. Amidst the plethora of orchestrated border crises, ongoing conflicts, and media distractions, the WHO Pandemic Treaty has quietly emerged, set to usher in a global digital health certificate.

If the average person fails to recognize the significant concerns and consequences associated with such a system, which we appear to be sleepwalking into, then I shall offer guidance to those who wish to take action.

As my favorite saying goes: what is the solution?

To begin, there is no single solution, but rather a comprehensive approach that revolves around one key principle: the willingness to adapt and relocate.

Just as Eastern European migrants who left their homelands before the Soviets arrived in 1944 were spared five decades of oppression, individuals today can choose to move to safer, less oppressive regions, although these places are likely to be outside the developed world. If you’re one of the patriots who wishes to stand firm in your homeland, then more power to you. This article is geared towards those who are willing to seek out places that offer them the most favorable treatment.

From both a geopolitical and historical standpoint, Latin America emerges as an optimal destination. Over the past century, not a single world war has unfolded in this region. In World War II, for instance, Brazil stands as the only South American nation on the list of casualties, with a total of 2,000. While domestic conflicts and coups have occurred and continue in the continent, such as Colombia’s 60-year civil war that started in 1964, you may not hear much about them when wandering the streets of cities like Medellin or Bogota, except perhaps through the radio during a taxi ride.

Take Mexico, for example. It has been entangled in a drug war since 2006 and ranks high on standard corruption scales. Many residents in major cities like Mexico City and Guadalajara can attest that COVID lockdowns were enforced. Yet, during my three-month stay in San Cristobal de las Casas, a colonial town in the southern border state of Chiapas, I found that the Tzotzil population continued with their daily lives, lockdowns or not. Given that a significant portion of their population participates in the “informal economy”, government stimulus wasn’t even offered. Chiapas was labeled a high-risk state for COVID infections by the central government. However, once officials in Mexico City realized that restaurants, grocery stores, industries, and tourism didn’t follow their shutdown orders, they promptly changed their assessment to “safe.”

In essence, two pivotal factors define Ibero- America: strong community bonds and a relaxed approach to rule enforcement.

Many local police officers genuinely desire to know their neighbors and build relationships with them, rather than displaying a Napoleonic complex. As an anecdote, I even engaged in calisthenics workouts with a local police officer during my stay in Chiapas, and he was eager to assist my family and me. Such an attitude is seldom found in Europe or the United States. A good tip for any place is to always know your local “copper”.

Undoubtedly, there are numerous law enforcement officials in Central & South America who view their role as an opportunity for extortion and accepting bribes. In response, one might argue that at least down there the average person can afford the corruption. Don’t tell me that politicians in first-world nations, like maskless Gavin Newsom or Neil Ferguson, breaking his own lockdown rules to meet his lover, have nothing to do with corrupt practices and knowing the right people. It’s simply a cost difference. Instead of shelling out thousands in kickbacks, the unscrupulous Latin American officers engage in similar activities for significantly less.

In Hispanic countries, rules are often regarded more as “suggestions,” and even when they are strictly enforced, there are typically ways to find alternatives. If you’re concerned about strict lockdowns, not only in the Southern Hemisphere but in any city, consider this pragmatic approach: open up a micro-business in photography. As a photographer, your job consists of going around and taking pictures… of whatever chosen by you or your “clients”, be it a bus stop, local park trees, or downtown buildings. As long as you’re carrying around a camera, you can justify your presence to authorities and go about your activities. This tactic, which worked during the COVID pandemic in France, can prove effective in Latin America and other developed nations as well.

One notable advantage of The Americas is their rich ethnic diversity. When choosing a new place to live, it’s wise to select a country where your appearance allows you to blend in with the locals, providing that you follow the dress code and local mannerisms. While in public, as long as you don’t speak with an accent in the local language, natives won’t easily recognize you as an outsider. While this might touch on the sensitive issue of skin color, it’s an essential point to consider.

Regardless of your ethnicity—whether you’re white, black, brown, Asian, or Arabic—moving to developing countries often leads to the assumption that you’re wealthy. Being perceived as a well-off foreigner can attract unwanted attention, potentially leading to issues like robbery, theft, or extortion.

While this is an unfortunate reality, you can easily reduce your risk by avoiding standing out to unscrupulous individuals. For instance, if you’re white, you may stand out more in Bolivia but blend in better in countries like Argentina, Uruguay, Chile, or Brazil. There’s a historical reason why Nazi ratlines chose these locations during World War II. Arabic individuals might find Mexico, Colombia, or Ecuador more suitable, given the prevalence of darker skin complexions in these countries. People of African descent might feel more at home in regions with a significant Afro-Latino population. Southeast Asian individuals often share similarities with indigenous populations, making Mexico, Peru, and Ecuador appealing choices.

The ethnic diversity makes it easy for foreigners to blend into a crowd seamlessly.

Lastly, Central & South American economies can be summarized as follows: cash is king. Many of these countries have some of the highest rates of unbanked populations globally. For example, as of 2021, 54% of Colombians, 57% of Peruvians, and 63% of Mexicans lacked a bank account. While countries like China, Russia, and the European Union explore Central Bank Digital Currencies (CBDCs), Ibero-America still predominantly relies on paper currency and coins. Although Latin America may adopt CBDCs in the future, it contradicts their culture of navigating rules and regulations and will be difficult to implement.

Now, let’s address the main pushback on everyone’s mind: how can one navigate visa restrictions to stay in these places?

For those with more financial resources, this is easier to mitigate. One avenue to consider is acquiring a second passport, or delving into residency programs that may ultimately lead to citizenship. For instance, in Panama, a $300,000 investment in real estate can grant you permanent residency in just about a month, with the sole requirement being a visit to the country every two years. Similarly, Mexico offers permanent residency to anyone who can demonstrate a savings bank balance of $220,000 over the past 12 months.

But what about average middle-class professionals?

The good news is that there are options available, but they require more effort. Paraguay, for example, offers free temporary residency that can be extended to permanent residency after two years, though it does involve several trips to the country. The government technically allows dual citizenship for Spanish and Italian citizens, but note that it requires at least three trips to the country to be eligible for citizenship, so it’s not exactly a “free” option. Other countries like Costa Rica provide temporary residency with proof of a $2,500 monthly salary for the past year, and permanent residency can be obtained after five years. You can technically obtain a passport after seven years, provided you stay in the country for more than 183 days each of those seven years.

There are other, more complex strategies one can use for free, such as continuously moving from one country to another every six months, spending six months in Peru and then six months in Ecuador, for example. If you enter Colombia in July, you can legally stay in the country for an entire year. However, these approaches require a highly flexible lifestyle and can still consume both time and money. For a smoother experience, I would actually recommend considering digital nomad visa options, which are available in many Latin countries.

Personally, the most appealing option for obtaining residency without having to invest hundreds of thousands of dollars is Ecuador’s investor visa program, which currently requires a minimum investment of $31,500, including real estate. It’s important to note that in the Latin American property market, most transactions are completed with upfront cash payments. Few people opt for loans or mortgages to buy houses due to high interest rates, which is one of the reasons property bubbles, so common in Europe or the United States, are less prevalent in Latin countries.

For the amount mentioned, it’s quite feasible to find a “finca” (a farm in Spanish) where you can grow your own food and lead a life away from the bustling cities. After all, one of the key aspects of escaping the biosecurity state is achieving self-sufficiency. What’s noteworthy is that you don’t even need to remain in the country after making the investment to secure permanent residency in three years, and you can apply for citizenship after four.

Fincas are a common investment for middle-class families in Latin America.

In conclusion, it’s crucial to remember that there’s usually a well-known solution to every human problem. While many European, Asian, and American countries appear to be veering towards more restrictive governance, certain countries worldwide, once under the yoke of strict dictatorships, have propelled their populations to a point where they’ve developed a heightened awareness of the perils of government overreach. The prior communist administrations and military juntas in these nations have contributed to fostering this awareness.

It doesn’t mean that the aforementioned programs and strategies will work forever. The key takeaway from this article is that developed nations are likely to increase their control over their populations, and establishing a community bank or engaging in “cash days” won’t address the underlying monetary reset issue. Instead of resisting the current trends, consider whether you and your loved ones might be better off living in a culture that isn’t overly regulated, values community and family time, and has abundant food production and water sources.

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

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The Great Reset & Precious Metals

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If you venture onto YouTube and search for “Great Reset solutions”, you’re likely to come across a handful of videos discussing the purchase of physical bullion and its storage in anticipation of an impending monetary reset. Over the decades, we’ve been rightfully advised that commodities, particularly precious metals, offer a historical safeguard against inflation. This reality has been especially prominent in the past century, from the alarming 96% devaluation of the dollar since the Federal Reserve’s establishment in 1913, to the hyperinflation of Weimar Germany, and gold’s remarkable price surge of 700% from 2000 to 2012.

Gold ($US/Oz) chart during the 2008 Recession

The concept of investing in precious metals derives from the impending Central Bank Digital Currency monetary reset. Historical examples, such as the Weimar Mark currency reform in 1923 or the Brazilian Real reset in the 1980s, enabled forward-thinking investors to exchange their stockpile of precious metals for the new currency at approximately market value. They did not hold the previous depreciating currency and instead smoothly transferred their wealth into a new fiat legal tender.

Nonetheless, this investment concept tends to overlook three pivotal factors. Firstly, there’s the well-documented manipulation of gold and silver prices through futures contracts. Secondly, we live in the world of increasing capital controls. And thirdly, the rigorous KYC verification procedures make it challenging to purchase untraceable gold and silver bars.

Let me elaborate. Many new investors may not realize that commodity markets are consistently manipulated by major players, such as bullion banks and institutional hedge funds. They do this through shorting futures contracts. In the futures markets, traders can engage in short selling without possessing sufficient amounts of the underlying asset, in this case, gold or silver. Large precious metals banks are often accused of assuming substantial short positions, which exert downward pressure on prices. If they can manipulate market sentiment or perceptions to create a bearish environment, they can profit from these short positions.

Due to these common market manipulation techniques, it becomes evident why precious metals have not kept pace with inflation, while other assets like stocks and real estate have. Whereas I, like many others, do believe that this artificial price suppression will at some point fail, do not buy bullion with the goal of short-term profits. Buy it as insurance against hyperinflation, or as a long-term store of value.

If you’ve chosen to stay-put and not relocate during an upcoming decade marked by war, lockdowns, and government overreach, then, by all means, invest in a robust safe and commence the accumulation of kilograms of bars and coins. Just remember to not tell anyone, even your mother, about the precious metal purchases and the place you store it. Also, it doesn’t hurt to install security cameras in and around your property and get a good guard dog. However, if you decide to move, you’ll encounter significant complications.

I genuinely hope that one day, dear reader, you will become a billionaire. But until you own your private jet or yacht, transporting kilos of bullion can be challenging due to capital controls in many countries. You would need to declare the gold or silver to customs officials. Almost all developed nations, such as the U.S. and most European countries, require you to report any precious metals exceeding $10,000 to border officials. This entails bureaucratic procedures, questioning, tracking and may result in paying import taxes. Furthermore, due to the weight limit of 500 grams for gold, there’s limited room for carrying larger quantities. Suddenly, a supposedly “liquid” investment becomes a cumbersome liability.

Finally, if you’ve recently acquired precious metals, you’re well aware of the significant KYC implications tied to the purchase. At best, the dealer requests an ID document, and just like that, your “anonymous” gold paper-cash purchase is linked to you. At worst, you’ll have to provide documentation on the source of funds. When selling, they’ll inquire about when and where you bought the bullion, how you funded the purchase, the source of income, along with the ever-present bureaucratic documentation recording your transaction.

So, what’s the solution?

The most effective current solution is investing in royalty and streaming mines, which provides low risk exposure to precious metals, primarily due to the small operating costs.

No depreciating equipment costs, licensing headaches or land leasing.

Regarding streaming, an investor provides funding to the mining company upfront. In return, the investor receives a continuous share of specific minerals produced by the mining operation, called the “stream.” This way, the investor avoids the day-to-day costs and risks of mining and gets a steady supply of minerals as a return on investment.

In the case of royalty mines, the concept is quite similar, except that instead of receiving a percentage of the metals mined, the investor gets a share of the revenues generated, referred to as the ‘royalty.’

The average investor has the option of buying shares in industry giants like Franco Nevada and Wheaton, but they miss out on actually receiving the essential benefit of this investment vehicle – obtaining physical gold or silver delivered to their chosen destination. This solution primarily targets wealthier individuals. One year you may reside in Mexico, the next in Indonesia, and the metal will be delivered from the source to your end location, provided it meets the minimum delivery requirements. A streaming mine has specific minimum delivery conditions and requirements, but when negotiated correctly, it’s an excellent way to obtain untampered commodities directly from the mining source.

As a more accessible investment option, the best alternative is to purchase high-grade, easily sellable numismatic coins. Most bullion dealers advise against buying rare gold and silver coins, as they tend to fluctuate in numismatic value and are deemed less liquid. I have many disagreements with this premise, so let’s break it down.

Firstly, it’s true that numismatic coins typically take longer to sell at their full price and don’t move as quickly as bullion. To sell them, you often need to go through an auction house, which charges a percentage as a listing fee. On the other hand, large volumes of bullion are not as liquid as some precious metal dealers may suggest. While you can easily find a buyer for an ounce of gold or a few silver Maple Leafs, selling substantial quantities can be considerably more challenging.

If you believe that you can offload $10,000 worth of silver overnight at your local dealer without incurring losses on the premium spread and seller fees, you might face some difficulties. So, ultimately, both investments are better suited for long-term holdings, where a 5-10% sale fee doesn’t result in a loss. However, unlike bullion, rare precious metal coins aren’t directly tied to commodity market manipulation. As a result, they have seen an increase in value over the past years in line with asset inflation.

A helpful article demonstrates this by presenting the author’s “Numindex” chart, which shows an average “numismatic” value increase of 9% over the past five years. It’s worth noting that this calculation specifically excludes the precious metal price in its assessment.

Additionally, the legal precedent of numismatic coins sheds light on potential outcomes in a future government confiscation of precious metals. Reflecting on the famous 1933 U.S. gold confiscation, Franklin Delano Roosevelt, soon after taking office, issued a less-publicized order that exempted certain gold coins, specifically those ‘having a recognized special value to collectors of rare and unusual coins.’ Later, in 1954, the Treasury Department expanded this definition to include all gold coins minted before 1933. This designation implies that gold coins predating 1933 have a legal standing as ‘rare and unusual.’ Why was such a loophole inserted? Because the wealthy donors bankrolling U.S. politicians often possess valuable numismatic coins themselves, and they surely didn’t intend their stash to be seized!

A common argument often put forth by bullion dealers is that, during a monetary reset, one can simply barter a silver ounce coin for food and supplies. Historically, this has rarely been the case. Ask the average farmer if they’d trade a silver coin for a gallon of milk, and their first reaction will likely be, “I have never seen a silver coin in my life- how do I trust that it’s silver? How do I value it? Can I eat it?”. While it’s true that you can’t dine on paper currency either, it will be readily accepted by the local store’s cashier. This observation is not meant to disparage the average worker or farmer; rather, it serves to highlight that many precious metals vendors incorrectly assume that the general population envisions a future based on precious metal trading and bartering.

Barter is a modern phenomenon. During the Soviet era, precious metals were not used for barter; instead, items like vodka, meats, Western technology, and services were exchanged in an unregulated underground economy. A more recent example includes Argentina, where people trade food supplies and even store bricks to combat inflation. Traditionally, the most common solution has been to adopt some form of credit system. After the collapse of the Roman and later the Carolingian Empires, people continued to keep accounts in the old imperial currency, even when they were no longer using coins, akin to an IOU system. History shows that populations do not typically use bullion for trade; they use it as a store of value and hoard it.

Suddenly, the debate shifts from liquidity to practicality. In this context, a well-preserved 1893 S Morgan dollar, one of the most recognized, popular, and liquid numismatic coins, becomes a superior choice to buying umpteen kilograms of Silver Eagles. $10,000 worth of silver bars would raise far more eyebrows with customs than carrying two or three Gothic Victorian Florins, another popular and liquid coin (particularly in former British colonies).

Consider investing in silver numismatic coins rather than gold ones. Border officials are more likely to recognize the high value of gold from movies and pop culture, while silver tends to fly under their radar. It’s less flashy and results in fewer hassles.

When it comes to selling older coins, you can employ the ‘I inherited the coin from my grandmother’ explanation instead of having to substantiate the initial purchase with extensive documentation. This tactic, for obvious reasons, is not effective when dealing with a bullion bar or a gold coin from 2022. However, it remains a highly plausible account for a 19th-century gold sovereign.

The most important factors when buying numismatic coins are as follows. Firstly, they must be uncirculated. The rarity of a coin means very little in this space; quality outweighs quantity. Secondly, the coin must be a desired and popular choice worldwide. While subjective, common traits include extremely low mintages (only 8,460 Victorian ‘Gothic’ type Crowns were minted, averaging a price of EUR 55,000 in the most recent online auction), appealing designs (like the Morgan dollar), or historical significance (the 1933 $20 coin is the most well-known example; FDR’s gold confiscation melted all but 20 of these coins, which are now worth millions for their historical context and scarcity).

This small, compact 1847 Crown was recently auctioned off for EUR 68,000

Thirdly, the coin must be graded by a reputable company, such as PCGS or NGC. Once the coin is “sealed” in a transparent case, with its details and grade labeled, this seemingly mundane process automatically elevates its value. A coin you purchase at a coin store or flea market may be uncirculated, but until an authoritative entity provides its stamp of approval, its value remains subjective.

Since you’ve reached this point in the article, I hope you’ll take away this crucial message: by all means, consider adding physical bullion to your wealth portfolio. After all, counterparty risk is currently at an all-time high. Many still have sour memories of last year’s FTX collapse, and who’s to say that payment platforms, crypto exchanges, or even banks won’t experience a similar fate? Remember, if you don’t hold it, you don’t truly own it. Buying royalty mining stock is only beneficial as long as the company continues to pay out dividends.

As a side note, buying physical precious metals and incorporating royalty or mining stocks into your portfolio doesn’t constitute true diversification since they all fall within the same industry. This, however, doesn’t hold true for purchasing numismatic coins. They are more closely linked to historic artifacts or even art than to precious metal prices. While gold prices have been artificially suppressed by bullion banks, rare collectible coins have generally increased in value in line with inflation. Therefore, considering a position in the precious metals markets alongside a few numismatic coins goes hand in hand.

To recap, investing in precious metals and numismatics is a proven strategy for wealth diversification and hedging against inflation. However, it has too many drawbacks in terms of flexibility to be considered a primary investment for the Great Reset. If your investment strategy is long-term, spanning several years, you might not be as emotionally affected by the volatility that comes with the territory. After all, during the demand-destroying event in March 2020, gold prices plummeted to $1,485, and silver fell even further, to just under $12. So, during the early stages of the pandemic, paper bills or cash in your bank account were far better than holding precious metals.

How can one capitalize on the pandemic market selloff to acquire assets at lower prices using their gold and silver coins? The next question to consider is whether you might be forced to sell your gold due to challenging financial obligations. It’s important to keep in mind that you can’t eat gold and silver, so maintaining adequate cash reserves, as well as supplies of food, water, and other essentials, is crucial. Do not become a forced seller. This way, you’ll have the option of deciding when to exchange your investments for their highest market value.

Let me conclude this article with a question, one that I hope to address in an upcoming post. With imploding bond prices wreaking havoc on bank, insurance and pension fund balance sheets, it’s evident that another financial collapse is on the horizon. The question is not if, but when. If such an event occurs, you won’t want to witness a 25-30% devaluation of your bullion. In these circumstances, cash remains the primary asset. The challenge is how to safeguard that liquid cash from inflation, the locking up of the financial system, potential bank bail-ins, and the inevitable Central Bank Digital Currency (CBDC) monetary reset?

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

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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 info@coinswithoutborders.com.