I would never have dreamt of writing about cryptocurrencies. Maybe because of my age or because of my longstanding experience in traditional investments. But never say never, Francesco Magistra writes in an essay for finews.first.
finews.first is a forum for authors to comment on economic and financial topics.
I am always appalled by how people who always regarded equities as a «high-risk investment» get to fall for this new instrument and make money (a few of them) and lose money (most of them) on Bitcoin and on the same 20,000 other cryptocurrencies that appeared and then disappeared during the past 15 years.
Bitcoin’s story is indeed appealing, and the charts talk by themselves leading want-to-be investors to dream about easy money to be made. A Microsoft (or Amazon or Google) 20-year chart could transmit the same feeling, as the stock was worth 0,10 dollars and is now close to $400. But as said, equities are felt as a boring and risky investment while crypto to the people «is different» and fashionable. They are right, but they don’t understand why.
«Cryptocurrencies seem to be out of reach for greedy tax offices and regulatory freaks»
We all think we know what Bitcoin is: it is a digital currency operating on a decentralized and distributed ledger technology known as blockchain. Unlike traditional currencies, which are subject to the control of authorities, Bitcoin functions on a peer-to-peer network. This decentralization eliminates the need for intermediaries, making transactions more efficient, secure, and resistant to censorship.
Let me translate: no banks and therefore no bank statements, no fees, no state intervention, no inflation, no regulation, no controls. Your assets are always with you, wherever you go, making a joke out of restrictive border regulations and capital controls. While 500 euro banknotes (and wishfully soon all cash, according to Mrs. Lagarde) are made to disappear, cryptocurrencies seem to be out of reach for greedy tax offices and regulatory freaks.
«It always happens on weekends»
It took me a trip to Argentina late last year to understand the full power of this new asset. The country’s recent economic history is indeed the best available school of economics. Among many other facets of the economy, it taught me that foreign currency holdings in your bank account do not wholly belong to you but can in a perverse way be considered part of the country’s international FX reserves.
After 10 years of stability in which 1 dollar was equal to 1 peso, on December 1st, 2001 (a Saturday) all bank deposits were frozen, and cash withdrawals were limited to 250 pesos per week. You were not allowed anymore to withdraw from your dollar account; one month later, on January 6th (a Sunday) the 1:1 convertibility was upheld, dollar holdings were forcibly converted to pesos and the peso started its precipitous fall, reaching 1,100 for 1 dollar today. So long diversification of investments.
«Holding a peso represents stress since inflation will diminish its purchase power by the next day»
Twenty years later, Argentina has still limits in place: you can only purchase 200 dollars a month at the official rate against your rapidly devaluating currency. Life in the country has again become like living on another planet: all transactions are done in cash, the parallel (blue, as they call the black market) exchange rate is often a multiple of the official exchange rate while every international transaction (import, export, traveling) was state-controlled and subject to authorization, at least until President Javier Milei took office.
Holding a peso represents stress since inflation will diminish its purchase power by the next day and has therefore to be gotten rid of. The sky is the limit to repressive and confiscatory measures by oversized, overregulated, overindebted countries. And I am not talking only about Latin America.
«Holding some Bitcoins in your wallet can make the whole difference»
Investment Guru Marc Faber recommends always having a few small (1-3 gram) gold pieces at hand, in case chaos breaks out; gold, however, can be easily confiscated, stolen, or discredited and you are not allowed to take over 10,000 dollars of it to most countries without declaring. Holding some Bitcoins in your wallet can make the whole difference.
An Argentinean travel companion of mine was able to evade all borders and eventually pay for his six-month vacation in Europe thanks to his crypto wallet. He always includes several Bitcoins in his tax declaration: «For the first time – he told me – the tax office must accept my word about my holdings since there is no official documentary proof showing my crypto assets».
What I learned: In a time marked by financial uncertainty, escalating monetary disruptions, tightening fiscal controls, and increasing banking risks, Bitcoin emerges as a revolutionary force reshaping the landscape of traditional finance. Much beyond speculation and investment, Bitcoin was designed and bears fiercely the role of challenging the status quo and providing individuals with an alternative means of financial empowerment.
«The asset is worth a bet»
Price volatility, regulatory uncertainties, and technological barriers remain risks and key aspects to address. Governments, grappling with the rise of cryptocurrencies, are navigating regulatory frameworks to strike a balance between innovation, financial stability, and control, a control I don’t expect them to be ready to give up easily.
In particular, in light of the forecasted launch of Central Bank Digital Currency (CBDC), a Troyan horse is presented as an alternative to standard crypto but designed to control, tax, and manipulate every single financial transaction. Europe is also out to launch an «Assets Registry» for getting close control of all holdings of all European citizens, including, art, physical gold, vehicles, ships and planes, equity participations, and real estate properties.
The aim is to include crypto assets as well, but will they be able to? The asset is worth a bet.
Francesco Magistra is Chairman of the Board of Directors of the Ticino-based Nemesis Group in Lugano and a partner at the firm Osiris Asset Management in Vaduz in the Principality of Liechtenstein. After completing his education in New York, he was appointed representative of Swiss Bank Corporation (SBC, later UBS) in Lima and then in Montevideo. After returning to Switzerland, he resumed the «Fixed Income Emerging Markets» sales development project before returning to Lugano as Head of Latin America, responsible for Brazil, Argentina, Venezuela, and Peru. In total, he worked for UBS for 15 years. He has been self-employed since 2001.
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