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Cryptocurrency – Legit or Not?

I don’t get to post here as often as John does. Let’s face it – he’s the Chile expert. But once in a while something comes up that I can help out with, so I’ll offer some thoughts and/or insight.

First, a disclaimer: I’m not a tech expert and I do not fully understand cryptocurrencies. Very few people do. Having said that, their design and the tools available are such that you really don’t have to be a techy to get involved. It’s just a matter of learning the ins and outs. You do need some pretty advanced knowledge if you really want to maximize their potential, though.

Ever since Bitcoin (BTC or XBT) made it’s big splash, hundreds of smaller currencies have tried to jump on board too. The most prominent of these include Litecoin (LTC), Dogecoin (XDG), Ripple (XRP), Namecoin (NMC), Stellar (STR) and Ven (XVN), among others. Most have waned, being sort of interesting sideshows more than anything. A couple of them have made early adopters wealthy, simply because they multiplied in value since their inception. It’ll be interesting to see which ones stand the test of time.

The strength of BTC lies in a few factors.

  • It was the first successful digital currency. That gives it weight that the others can’t enjoy. They’ll always be competing with and compared to Bitcoin.
  • The equation for mining continues to increase in difficulty. Eventually it will be impossible, which limits the total possible number of Bitcoin to 21 million. As of today, 15,645,775 have already been mined. However, many have been lost for various reasons, which may or may not negate the continued increase in production.
  • They are easily transferable
  • They are mostly anonymous (depending on how you use them, where you store them, what services you use, etc).
  • They are infinitely divisible

Some of these qualities make it comparable to gold, and certainly superior to centrally controlled fiat currencies.

Gold                                             Bitcoin

Yes            Limited supply            Yes

Yes                 Portable                 Yes

                        Yes                 Divisible                 Yes, even more so

Yes                 Durable                 Yes

                         Yes            Inherent Value           Not really, but kinda

Centrally controlled currencies, on the other hand, are not limited in supply, are not endlessly divisible and have no inherent value other than the material they’re made of. Bitcoin’s inherent value is based on the fact that it requires energy to create and it is limited. But it really has no other value, so, while superior to centrally controlled currencies, it really doesn’t have inherent value.

Depending on your goals, desires and personal philosophy, the advantages of crypto-currencies may vary. If you appreciate anonymous or unreported transport and trade of currency, then there’s nothing like it. And vast amounts of wealth can be stored nicely, though subject to incredible volatility. So you’ll have to decide for yourself if it’s something that will work for you. There are places where trading in and for BTC will be difficult, but all of the advanced world is open to BTC trade, even where it’s frowned upon by the state.

While we won’t discuss all the coins above, there are three more crypto-related instruments I do want to discuss. One, Ether (ETH), is a cryptocurrency akin to BTC. It’s designed to work on the blockchain, but the language behind it is different. The purpose of its developers was to make it more conducive to peer to peer contractual negotiations, without the need for a middleman or any type of escrow. The contract itself serves as a sort of escrow, requiring both parties to finalize fulfillment. I’d like to share more, but it’s a bit over my head.

Just as with BTC, early adopters of ETH have profited handsomely, even though the coin has only been openly trading for a few months. In an effort to raise funds, Ethereum (behind the creation of ETH) presold ETH for BTC a couple of years ago. The USD price equivalent was less than 50 cents, varying according to fluctuations of BTC at the time and at what stage early investors entered into ETH. With a current price hovering around US$14, the earliest adopters have seen an increase in US$ value far exceeding 2800% – hardly something to sneeze at, especially considering that it’s only been trading for several months.

Another new crypto-instrument (not coin) is DAO (Decentralized Autonomous Organization). DAO had an initial offering of DAO tokens that could be purchased with ETH. Once this adoption phase was over, no more DAO were created, thus locking in the total available. The goal if DAO is stated clearly on their site – “The DAO’s Mission: To blaze a new path in business organization for the betterment of its members, existing simultaneously nowhere and everywhere and operating solely with the steadfast iron will of unstoppable code.” Those holding DAO can “invest” in various entrepreneurial efforts, though there doesn’t yet seem to be a clear structure to how this will work. You can find more information than you can absorb in the link above.

There are various places where you can trade these instruments. However, Kraken has jumped to the fore in recent months, perhaps offering traders the greatest versatility in trading ETH, BTC, DAO and other currencies/tokens.

For buying and selling BTC only, many appreciate LocalBitcoins. You can list your coins and sell to someone local, offer cash sales, transfer upon cash deposit or other methods of payments. Or you can search their ads for someone who might be selling coins near where you are, in many places around the world. Volume is high in the US, but not so much in many areas. Make sure you look closely at the spreads, consider how much you want to pay/sell for and be careful about verifying funds received and/or marking the trade as paid if you are buying. Marking it paid must be done within a defined time period, usually three hours, in order to lock the coins in escrow. Failure to do so within the prescribed time period may result in you losing the coins, depending upon the integrity of the buyer. LocalBitcoins will intervene in obvious situations, but who wants to go through that hassle?

While I think DAO will work well, I don’t really know what to expect of it. Time will tell. ETH seems pretty much unstoppable. During it’s presell period, I shared it with many friends. Not one of them jumped in. When it started trading, I shared with a few friends again. To my knowledge, only one jumped in and bought some. Within three months he had tripled his value in US$. As of today, he has roughly five times the value of his original investment. Obviously he’s pleased with his acquisition.

There’s another attempt to get into the crypto-currency market from an MLM angle. These sometimes work wonderfully, but often fall short as well. Early adopters almost always do quite well, while those who wait tend to flag a bit behind or even fail to realize a full return on their investment. It’s speculative, but also rewards those who are willing to work at promoting it.

one-coin

The company is called OneCoin, and must be differentiated from BTC and ETH (DAO is different anyways, and the others are small players). OneCoin is set up to get as many people involved as possible through somewhat of a pyramid structure that rewards those who promote it best. Tokens are provided for your efforts, as well as cash and actual coins. Tokens can be “invested” in mining, but also multiply over time. This challenges the holder to decide whether to invest now or wait until they have more. Like Bitcoin, the mining formula increases in difficulty, so it is possible that waiting will result in diminishing returns. The ONE Coin (ONE) is also backed by a certain amount of gold, though I have had difficulty discerning the formula.

John really likes OneCoin. For him it makes the most sense. So he’s started getting others involved. For me, they all have their purposes. I’ve been in BTC for almost three years now, have been trading ETH and also picked up some DAO. DAO is, in my opinion, the most highly speculative of the three, and clearly a different animal. ETH and BTC I think are here indefinitely, and will increase in value over time, perhaps substantially. OneCoin seems speculative to me as well. While I have gotten involved, I also realize that it’s a different animal than any of the others. So I’ll continue working all four in my effort to increase my holdings. Maybe one day it’ll all pay off, even if only through one coin (not necessarily OneCoin).

  • Go here to get involved in OneCoin. If you’d like help in deciding what to do, let us know and someone will get in touch with you.
    SPECIAL NOTE TO THOSE WHO REALLY WANT TO GET INVOLVED – We have spots saved for anyone willing to get aggressive. We will help you promote your marketing. Please contact us through the comments below and we’ll get with you shortly.
  • Sometimes folks like to send tips when they receive helpful info: 🙂
    • Send ETH here – 0x8766A096D012E9E604F62F113fc0018A10092991
    • Send DAO here – 0xbb9bc244d798123fde783fcc1c72d3bb8c189413
    • Send BTC here – 14VvCsaLRCVS2z5veVYTRumvFauLLEK1nE

Offshore Banking Under Fire

One of the worst parts of holding an American passport, besides FATCA rules that impede financial privacy and freedom overseas in general, and the obligation to pay income taxes on worldwide income, is traveling among hostiles. I am not just talking about travel within Arab countries or places like Central America, Venezuela, Cuba, Russia and China where Americans are targets for kidnapping or being brutally killed. I am specifically talking about offshore tax havens like Singapore, Mauritius, Guernsey, Bermuda, Cook Islands and Andorra.

Earlier this year, the United States government literally flexed its muscled against the last country in this list and smashed Banca Privada d’Andorra by asserting that the bank had ties to money laundering. To avoid international exposure, local regulators took over the bank and has spent four or five months sorting out the “dirty” from “clean” accounts, the latter to be transferred by year end to a new bank called Vall Banc. In the meantime, all account holder assets have been frozen, excepting only small withdrawals under strict monthly limits.

I recently interviewed a Banca Privada d’Andorra bank official (in person) that told me how every offshore bank in Andorra and presumably the world is under high alert, worried that the same thing might happen to them. According to my source, so far no one has lost their money but the hassle, intrusion and loss of sovereignty for the tiny country of Andorra are significant.

Most of Andorra’s economy is financial tourism, with skiing a distant second. The Andorran case showed that the United States government can literally bring a bank or country to its knees at will, regardless of local politics. If the bank does not play by American rules it will be punished. We saw the same thing happen in Chile when FATCA was rammed down the throat of the Chilean banking system this year, violating Chilean privacy laws and making Americans second class citizens in terms of financial and banking rights.

Andorran banks see the hypocrisy in all of this rhetoric and action. The official mentioned to me that America has its Delaware and Nevada corporate havens and yet has demonstrated that it simply will not leave fiscal paradises elsewhere in the world alone. Who made the USA the banking watchdog of the world anyway? Does might make right?

Now, American passport holders have to face more than just extra scrutiny in normally friendly places around the world. They will also have to work to avoid local and commercial scorn by going on record to distance themselves from the evil feudal policies of the United States government.

Americans looking to place assets overseas need not worry about problems with Banca Privada d’Andorra, however, since, according to this article, one of the sanctions sought by and granted to the United States is that this bank will not be allowed to open accounts for American companies. Moreover, those that already have accounts will be placed under heightened vigilance and scrutiny. How pleasant! Still want to hang on to that American passport? Still happy that “Big Brother” is there watching out for your “best” interests?

For years I have suggested that expats coming to Chile not use Chile as a place to leave the bulk of their cash and assets, other than for gold storage and for its fantastic tax-advantaged life insurance products. For most financial holdings, offshore jurisdictions should be sought out instead. Places like Andorra were particularly interesting because all bank representatives speak Spanish and Andorran banks will open accounts using legal and company documents set up in Chile. Now all of that has come into question. Maybe it will be best to bring more assets to Chile and store physical gold in safe deposit boxes rather than risk using an offshore bank that will possibly be the next victim of United States government foreign policy,

One other bit of food for thought. As I left the interview and drove back over to Spain (there are videos on You Tube showing the border stations), I found that its customs agents are standing with the USA by becoming particularly ruthless toward anyone that looks like they might have visited a bank in Andorra, doing car and personal strip searches, scouting for cash and trying to make trumped up cases that people with Andorran bank accounts are really money laundering. In fact, I can think of few other countries with more pernicious, mean-spirited and nasty border police than Spain has, close behind the United States in characteristic thuggery and power-trip mentality–so common in the “land of the free” ever since the Waco, Texas massacre in early 1993.

Bottom line: if you are an American citizen that thinks your assets are “safe” in an offshore jurisdiction, think again. Not only do you need a Plan B country, you need a Plan B offshore bank. Diversification is important. If Andorra is not safe, then neither are Singapore, Panama, Jersey or Mauritius.

Be sure to become a member of Escape America Now and gain access to the monthly webinar. Details at www.esccapeamerianow.info. Visit AllAboutChile.com for discussion and forums about the country.
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