Why is there a discussion about “wartime asset arrangement”?
Geopolitical tensions often have profound impacts on the economy and financial markets. The relationship between Taiwan and China has long been a focal point in the Asia-Pacific region, and even global geopolitics. Recently, a netizen posted on PTT’s stock forum with the title “Asset Arrangement During War,” sharing their current asset allocation, which has sparked widespread discussions among netizens.
In simple terms, the netizen’s core strategy is to convert assets from New Taiwan Dollars to US Dollars and transfer funds to overseas accounts for international use.
The reason for discussions on “wartime asset arrangement” is that, in the event of war, Taiwan’s financial system would face multiple shocks, including panic-induced bank runs leading to liquidity crises and bank collapses; a significant drop in the stock and real estate markets; a temporary devaluation of the New Taiwan Dollar, which may even become worthless if defeated; and the potential disruption of financial institutions due to physical damage or cyberattacks.
These various issues not only have the potential to make a large portion of assets “evaporate” but also could prevent funds in banks from being withdrawn. To avoid such a situation, many Taiwanese investors are considering how to diversify their assets, hold hedging assets, and understand possible government responses.
Is the netizen’s strategy good?
The strategy outlined by the netizen includes several steps: holding an iPhone for FaceID login, opening an IBKR account for securities trading, linking a Taiwanese bank account for quick transfers, opening a HSBC Taiwan Premier account for global services, opening an HSBC Singapore account as a safe haven for funds, and finally, in the event of a crisis, quickly transferring assets overseas and using a DebitCard to maintain daily life.
The author stated that the main consideration of their strategy is “ensuring asset allocation does not go to zero,” thus emphasizing fully online operations, bypassing issues with SMS verification using FaceID technology, and avoiding potential bank runs in Taiwan. However, the question of whether to escape the country is not within their consideration.
However, for general investors, replicating this strategy poses certain challenges:
- First, the strategy relies almost entirely on the internet and mobile phones. While it ensures the safety of assets abroad, it is essentially impossible to operate these assets without an internet connection.
- When war breaks out, communication infrastructure is likely to become a primary target, and disruptions to mobile signals and the internet are highly likely. Even with an iPhone with FaceID, without internet access, logging into online platforms would not be possible.
- Second, this strategy is quite time-consuming and must involve “prearranged asset allocation.”
- As financial systems will be severely impacted once war occurs, foreign exchange controls and currency devaluation are unavoidable issues. International financial transactions during wartime may also be restricted. Additionally, Taiwanese regulations currently require foreign exchange declarations for amounts exceeding NT$500,000, making this strategy difficult to complete in a short time frame.
- Most importantly, this strategy almost entirely ignores individual security and movement restrictions.
Asset allocation is important, but in a war-torn environment, personal safety should be the primary consideration. Even if assets are successfully transferred abroad, if one cannot safely leave Taiwan or maintain basic living conditions, the value of those assets is significantly diminished. Therefore, not everyone should adopt this asset allocation strategy.
Is gold a good choice?
Many netizens in the PTT discussion believe that no matter how assets are allocated, gold remains the best choice. “Gold is still versatile,” “This has been discussed to death, the answer is physical gold, what good are those accounts?” and “Better exchange for some gold and hide in the mountains for a few days until the war ends.”
Gold has shown strong hedging characteristics during periods of war and geopolitical instability. Historically, gold has proven its resilience during wars and conflicts, even when local currencies depreciated or became worthless due to political and economic instability.
Additionally, wars lead to inflation caused by supply chain disruptions and increased government spending. Gold has always been an effective tool to counter inflation, and as the purchasing power of fiat currencies decreases, gold becomes more expensive.
One netizen pointed out, “A brick weighs about 2 kg, and at today’s gold price, 2 kg of gold is worth about NT$6 million. It’s not so ‘heavy’ that it can’t be moved, and it ensures a significant amount of assets are safe.”
However, the drawback of gold lies in how to “physically store and move” it. After all, carrying gold abroad during peacetime requires declaration to customs if it exceeds US$20,000, and in wartime, stricter controls are likely. Moreover, carrying such a large amount of gold while fleeing during wartime could expose individuals to the risk of robbery.
Is cryptocurrency a good choice?
Besides gold, some netizens also highly recommend cryptocurrency, saying “Cold wallets are good,” “I would go for cryptocurrency,” and “With FT and Crypto.com cards, I can live freely abroad.”
In the event of war, cryptocurrency does have potential advantages as a wartime asset allocation option, but it also comes with notable risks and challenges.
Potential advantages of cryptocurrency as a wartime asset allocation:
- Decentralization and borderlessness: Cryptocurrencies do not rely on any central government or financial institution for issuance and management, theoretically avoiding the risk of financial system collapse in any single country or region. Their borderless nature makes them a potential alternative when traditional financial channels are blocked for cross-border asset transfers.
- Portability and concealability: Compared to physical assets like real estate or gold, cryptocurrencies exist in digital form, making them easier to carry and hide. This is a significant advantage in situations requiring emergency evacuation or avoiding asset confiscation.
- Potential for value storage: In times of severe currency devaluation or hyperinflation, some believe cryptocurrency can serve as a store of value, even though its price volatility is high.
- Bypassing traditional financial systems: In cases where banks are closed, international remittances are blocked, or financial systems are disrupted, cryptocurrency transactions may provide an alternative means of maintaining economic activity and making payments.
However, cryptocurrency as a wartime asset allocation also faces significant challenges and risks:
- High reliance on internet and power infrastructure: Cryptocurrency transactions and management rely heavily on internet and power supply. In wartime, these infrastructures are easily targeted, and if disrupted, cryptocurrencies will be difficult to use. This is similar to the risks faced by smartphones and online trading systems.
- Security risks: The security of cryptocurrencies depends on the protection of private keys. In a chaotic wartime environment, the risk of losing, stealing, or hacking private keys increases significantly.
- Price volatility: Cryptocurrency prices are highly volatile, and this uncertainty is likely to be exacerbated during wartime, reducing the reliability of cryptocurrency as a store of value.
- Acceptance and liquidity issues: Despite the growing popularity of cryptocurrency, its acceptance as a payment method may be questioned during extreme situations like war. Its liquidity may also decline sharply due to market panic.
- Technical barriers: Using cryptocurrency requires some technical knowledge and operational ability. For those unfamiliar with it, learning and using cryptocurrency in an emergency may be very difficult.
What does AI recommend?
When faced with the difficult question, “If war breaks out, how should Taiwanese people arrange their assets for wartime?”, the AI software Gemini offers the following advice.
Recommendation 1: Build a cash buffer reserve for daily use
Establishing an easily accessible cash buffer reserve in a separate bank account is a basic and prudent step to protect financial assets during uncertain times, such as potential war. This cash reserve should be enough to cover several months of basic living expenses, providing a financial safety net in case income is interrupted or other funds are inaccessible.
Recommendation 2: Open an overseas bank account
Opening a second bank account in a neutral and financially stable country can provide a safe place for funds, ensuring that even if the domestic financial system faces disruption or restrictions, funds can still be accessed.
For individuals holding precious metals such as gold and silver, considering secure and prudent storage facilities outside Taiwan (e.g., Switzerland or Singapore, which are known for their stability and financial security) can further mitigate risks associated with domestic instability or potential asset freezes.
Recommendation 3: Understand Taiwan’s asset transfer regulations
Taiwan residents must thoroughly understand and strictly comply with Taiwan’s regulations on holding and transferring foreign currencies. This includes declaration requirements when carrying over US$10,000 in cash upon exiting Taiwan, and the need for prior approval from the Central Bank of Taiwan for foreign exchange transactions exceeding a certain amount.
Recommendation 4: Develop a financial plan
Developing a comprehensive and well-documented financial plan, with clear responses to potential conflict scenarios, is a crucial step in protecting personal assets. Seeking guidance from experienced financial advisors who specialize in international investments and geopolitical risks can provide tailored advice and support for asset allocation, risk management, and long-term financial security.
Recommendation 5: Carefully review insurance policies
Taiwan residents should carefully review their existing insurance policies to determine the coverage in the event of war or armed conflict. Although comprehensive war risk insurance policies for individuals may be limited in availability or scope, understanding potential options may provide additional financial protection against certain types of loss.
In any case, when facing the extreme risk of war, a more comprehensive approach should include not only asset allocation but also personal security planning, emergency supplies, and a more diversified asset-holding strategy, such as holding physical precious metals and even considering more extensive asset arrangements in different countries or regions.
Of course, we all hope for everlasting peace, and that war will never happen. But being mindful of potential risks and planning ahead for extreme scenarios is undoubtedly a responsible attitude toward oneself.