Bitcoin does the same for companies as it does for individuals: it gives them more freedom. In the wake of large public corporations adding bitcoin to their balance sheets, I want to explore the larger implication of companies adopting Bitcoin.
As companies adopt Bitcoin, they will begin to gain new levels of sovereignty and leverage over the state as well as expand their ability to do trade globally. Today, bitcoin is still an alternative treasury asset, but as more and more powerful organizations begin to use Bitcoin directly, they will begin to shy away from the overlap of governments. This in itself will challenge the dynamics of governance and the nature of states as we know them at present.
In this article, I will break down the holdings necessary for a company to gain sovereignty with bitcoin today as well as explore what the “future of a sovereign company” has.
How to Establish the Future of the Sovereign Company
Step one: Hold the treasury in bitcoin and release the purse with cold hard financial energy.
Obviously in the Square and MicroStrategy cases, there were business reasons for converting portions from the balance sheet to bitcoin. However, it is not enough for a company to hold bitcoin simply for it to become a sovereign company.
For a company to become truly sovereign, it must run a full goal and keep its own keys in a geographically distributed manner.
Step two: Self-custody of the bitcoin.
By keeping your own Bitcoin private keys, you are taking advantage of all the features of Bitcoin’s censorship and seizure resistance. These features significantly reduce the cost for a company (or individual) to break away from a geography or jurisdiction that has all of their value.
Step three: Ensure complete geographical mobility and control and leverage of jurisdictional arbitration.
This kind of geographic sovereignty was extremely expensive and complicated before Bitcoin.
With Bitcoin, a user or, in this case, a company, holds their bitcoin keys so they can plug into the internet of value and trade.
Yes, it’s still clunky, but the key is that operating outside the legacy system globally is now possible. The alternative economy is here.
But what exactly is jurisdictional arbitration?
Jurisdictional arbitration, geographic arbitration or political arbitration is the act of domination in highly friendly countries for regulators while still serving a global customer base. Jurisdictional arbitration is particularly suitable for internet businesses and services. It is often frictionless and cheap to locate in favorable jurisdictions but serve customers in less friendly jurisdictions.
Sovereign companies are companies that have adopted Bitcoin as their reserve currency, self-owned their bitcoin and created jurisdictionally mobile and beneficial construction.
The near future will be hostile to sovereign companies. Sovereign companies will have to be insensitive to avoid the taxman and the arbitrary and onerous restrictions to which large predatory jurisdictions seek to be subject to a sovereign company.
Taking a Glance For The Future: The Nation’s State Statutes
What are the implications of a company becoming sovereign? We can explore this by considering the BitMEX case study.
In early October 2020, the Commodity Futures Trading Commission (CFTC) and other US agencies launched an attack on the legendary Bitcoin BitMEX leverage exchange.
US authorities arrested BitMEX registrar and CTO Sam Reed in Boston and issued warrants for the arrest of the exchange’s other cofounders. After posting bail, Reed is currently out of custody, though he is not free to travel.
This was not the first time the United States had raised an attack on a cryptocurrency exchange, but this time things played out differently than ever before.
BitMEX is a unique big exchange, because it never touches on fiat at all in its operations. The whole business operates only with bitcoin. When the US invaded, he took Reed, who lived in the US, into custody. The remaining BitMEX team was out of the reach of US officials and managed to evade custody.
BitMEX was ordered to cease operations, but, because its financial base was only BTC, the CFTC could not arbitrarily seize BitMEX funds.
Here is an example of a Bitcoin-resistant property in action.
Because BitMEX still has full control of its Bitcoin keys, customers could still withdraw their funds and, since the initial attack, BitMEX has responded that the exchange will continue to operate and that senior leadership would step in to down so that new leadership could conduct business operations.
This turn of events shows the unprecedented amount of sovereignty and BitMEX’s ability to defend against the U.S. government, the most powerful organization in the world.
I would argue that because of Bitcoin, BitMEX gained a level of sovereignty that was held only by states before the existence of Bitcoin.
The key to unlocking this sovereignty is the combination of the Bitcoin standard and jurisdictional arbitration. With this formula, any large organization can become sovereign.
In a world with huge tech giants like Apple, Google and Amazon already pushing the envelope for corporate sovereignty, it’s not too far-fetched to predict how Bitcoin’s features will accelerate this. At some point, large corporations will have to become sovereign.
As big governments begin to micro-manage both large and small businesses, these businesses have two choices: comply or opt-out. Bitcoin solves countless problems for almost every type of business, including this one.
As more and more companies turn to Bitcoin to stymie inflation, it is inevitable that they will also increase their own sovereignty in order of magnitude. Imagine the negotiating power of Facebook or Apple with even the largest states in a world where they hold their reserves in irrevocable digital gold and their executives are all international sovereigns themselves.
This future is not far from today’s reality.
We have the technology (Bitcoin) and companies are adopting it (bitcointreasuries.org).
I have no idea what the future of a corporate organization will look like. I don’t know if it will come in the form of Devolved Autonomous Institutions (DAOs), or whether Google will just adopt the Bitcoin standard and diverge from the US What I know is that Bitcoin confers a lot of sovereignty companies and individuals and management and, as the world goes on board Bitcoin, companies become much more sovereign.
As noted in the prophetic book “The Sovereign Individual,” the mega political gains on violence have changed. Because of Bitcoin, smaller organizations and jurisdictions will be enabled to compete with larger, more powerful ones and will create the conditions businesses need to serve the internet economy, playing from a home base that they will not regulate.
The macroeconomic consequence of this will change the human experience for the better. People and companies will have choices because of worldwide competition.
This is a guest post by Christian Keroles. They are solely their own opinion and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.