Importance of Self-Custody

Self-custody of bearer assets such as gold or Bitcoin is essential for the following reasons.

1. Hedging Purpose

Gold and Bitcoin serve, in particular, to hedge against tail risks in the existing financial system. Gold and Bitcoin therefore become (especially) valuable precisely when familiar structures begin to falter and collapse. In other words, when gold and Bitcoin are stored with a third party, they become vulnerable at the very moment they become most valuable.

2. Reversibility of Transactions

Financial instrument such as bonds, stocks and ETFs are normally intermediated securities. Although intermediated securities can be transferred from one regulated gatekeeper to another, such securities cannot be held directly. That is why the theft of intermediated securities is easily reversible.

Gold is also reasonably portable – even if it is difficult to smuggle it across the border unnoticed. And it can be held directly without intermediaries. The theft of gold certainly has undesirable consequences, but there is a (good) chance of apprehending the perpetrator and confiscating the gold.

Bitcoin can also be held without intermediaries. Because it is intangible, it is easy to transport across borders and very difficult to confiscate. Once Bitcoins are stolen, they are almost irrecoverable.