How Bitcoin Protects from Confiscation

  • Governments are facing a public-finance nightmare.
  • CBDCs and a global asset registry would give governments access to everyone’s assets.
  • The case for Bitcoin has never been stronger.

Why Confiscate

Governments are trapped in a public-finance nightmare. They have raised unsustainable levels of debt while central banks have created spiraling inflation by printing money and debasing fiat currencies. These combined factors risk dragging the global economy into stagflation. Faced with a recession and high levels of inflation, governments will have little room to maneuver and may face rising social unrest and extremism.

In this context, governments will have to take increasingly bold measures to try and bring public finances under control. This may begin by an increase in taxes. As these fiscal measures fail due to over-optimistic estimates and capital fleeing to low-tax jurisdictions, governments will then consider other measures. These other measures may include confiscation. Under the guise of controlling inflation or tackling inequality, governments may begin taking over certain companies or controlling certain markets. They may also begin to expropriate second homes or “unused” real estate. These measures are likely to begin in authoritarian regimes, but may easily spread to the rest of the planet.

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How To Confiscate

There are two proposed tools, which would facilitate a government’s efforts at confiscation. The first is the implementation of central bank digital currencies (CBDCs), which would allow governments to know where everyone’s liquid financial assets are located. Confiscation would then be simple and instantaneous. Centuries of legal development aimed at limiting the government’s ability to confiscate its citizens’ property would be nullified.

The other tool, which has recently been proposed by some of the world’s most renowned economists is a “global asset registry”. In a recent open letter, they urge G20 leaders to create this “global asset registry” to tackle tax evasion. They cite the growing wealth of billionaires during the pandemic to justify this unprecedented action. They also mention the difficulties encountered in sanctioning Russian oligarchs as a consequence of the war in Ukraine. While admitting progress has been achieved in terms of international financial transparency, their letter states that what has been done “falls far short of a true mechanism to track, disclose, and reveal wealth everywhere.”

A global asset registry would collect information regarding the beneficial owners of a range of assets around the world. The non-exhaustive list of assets mentioned in the economists’ letter includes real estate, bank accounts, safe deposit boxes, trusts as well as “financial securities, crypto assets, artworks, jewelry, yachts, planes, other luxury items, and even intangible assets such as intellectual property and trademarks.” This registry would then be available to governments who could supposedly combat tax evasion and other forms of criminal activity.

Besides representing an unprecedented violation of privacy, these measures would probably prove highly ineffective. It seems highly unlikely that stolen artwork or yachts obtained through ill-gotten gains would suddenly be registered on a global, national or even regional asset registry. These well-intentioned policies will only penalize law-abiding citizens and make criminals find more creative ways to hide their assets. These measures also tend to start by targeting the wealthy but eventually trickle down to the rest of the population.

Conclusion
Bitcoin was designed to fight overreach and preserve privacy in the digital world. As physical cash is phased out, Bitcoin will become the only hope at retaining an anonymous transaction system. To protect one’s privacy, however, one needs to hold Bitcoin in self custody. This gives one full control over one’s Bitcoin and protects it from any overreach. When held in a centralized exchange, instead, Bitcoin is vulnerable to the pressures that governments apply on these institutions. The rising calls for CBDCs and a global asset registry make an increasingly strong case for Bitcoin.

Nothing in this article constitutes professional and/or financial advice. The content is provided exclusively for informational and/or educational purposes. Nothing is to be construed as an offer or a recommendation to buy or sell any type of asset. Seek independent professional advice in regards to financial, tax, legal and other matters.

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