Exclusive Singapore jurisdiction
Silver Bullion's founder, Gregor Gregersen, speaks about the best jurisdictions to store gold/silver offshore.
By establishing The Safe House, our 630 ton capacity vault in Singapore, removing middlemen and eliminating ties to Western jurisdictions, we ensured that Singapore jurisdictional protections are not undermined by foreign regulatory ties in the event of foreign gold nationalizations. Gregor Gregersen, the company's founder, even renounced his German citizenship and became Singaporean.
Global vault contracts provide little protection against nationalizations
There is only a small number of vault operators worldwide. Countless bullion dealers and banks then outsource the physical storage to these vault operators. This created a two-tier system. Bullion dealers outsource to vault operators because it is much easier and requires far less capital. Vault operators in turn don't buy or sell assets because it would be a conflict of interest with their dealer clients.
Thus if you store bullion most dealers will in turn store it with one of these globally operating storage operators. However, from a systemic risk perspective, having operations in many countries also implies exposure to the laws and regulations in those countries and ultimately the United States. This reality is reflected in the Force Majeure clauses of vault contracts between dealers and vault operators which typically state:
“[Vault Operator] SHALL NOT BE LIABLE under any circumstances whatsoever for:
Confiscation, seizure, appropriation, expropriation, requisition for title of use or wilful destruction of the Goods, or portion thereof, by/or under the order of any Government (whether civil, military or de facto) and/or public authority”
The clause illustrates the concept of "counterparty jurisdictional risk". In practice this means that any gold stored with U.S.-exposed vault operators is subject to U.S. laws, whether the bullion is stored physically within the United States or outside the U.S.
U.S. Executive Order exposure is particularly concerning
On April 5th, 1933, US President Franklin Roosevelt issued Executive Order 6102 requiring all privately owned gold to be delivered to the government within 25 days, on penalty of up to 10 years in prison for non-compliance. Refer to our article Protect your Wealth from Escheatings, Nationalizations and Confiscations for our thoughts on this matter.
Executive orders are made at the discretion of the U.S. President in a near dictatorial manner without review or approval from U.S. Congress. Although Executive Order 6102 could be interpreted to be in violation of Article 1 Section 10 of the U.S. Constitution which states "No State shall ... make any Thing but gold and silver Coin a Tender in Payment of Debts" it nonetheless became law overnight in the United States.
Should such an order be issued today it is a near certainty that bullion stored all over the world would flow back to the United States Government, never to be returned. Executive Order 6102 for example mandated that gold be nationalized in exchange for USD 20.67 per ounce in 1933 (now worth 1,786.80 USD) and when the order was eventually repealed in 1974 there was no way to claim back the seized gold.
The Nationalization Event Protection Clause
Our S.T.A.R. Storage system was designed from the outset not to have any material exposure to the United States or Europe and fall only under Singapore jurisdiction. In practice this means that we do not recognize the authority of foreign courts and we do not have significant assets outside of Singapore that can be used to exert pressure on us.
Furthermore, as customers own parcels as property, it would be illegal under Singapore law for us to surrender our customer's property to a third party, even if the third party is an enforcer of a U.S. nationalization order. Our vault subsidiary, The Safe House, also operates only in Singapore and ensures this jurisdictional clarity is not compromised.
In addition, customers can opt to activate our Nationalization Event protection clause. Should you enable this feature – you may set this preference on your account profile - we will freeze your holdings and will no longer accept remote orders should we determine that a nationalization event had occurred in your country. The clause prevents bullion to be re-patriated in a nationalization event even if we are instructed to do so by you. You would have to fly to Singapore to "un-freeze" your holdings.
Why Singapore is Safe
Wealthy and Stable
Singapore is a multicultural English speaking city-state in Southeast Asia. Despite having no natural resources, Singapore transitioned from a third world country 50 years ago to become, through good government, the country with the third highest per capita income in the world. We highly recommend reading From Third World to First: The Singapore Story by former Prime Minister and founder of modern day Singapore, Lee Kuan Yew, to understand how this was done.
The city state has virtually no crime nor corruption, and despite low taxes it has consistently recorded budget surpluses. It is the only Asian country to be rated AAA by major credit rating agencies. The Economist ranks Singaporeans as having the best quality of life in Asia and today’s Singapore is socially very stable, as well as a cultural bridge between Asia and the West with English being the primary of four official languages. The country has a welcoming stance towards foreign investments. Singapore’s economy is pro-business with free flow of capital.
Singapore's monetary reserves are managed by three reserve management entities / sovereign wealth funds: Monetary Authority of Singapore, GIC Private Limited and Temasek Holdings with combined holdings of at least USD 560 billion, or equivalent to USD 167,000 per citizen. For details see: What comprises the reserves and who manages them?
The Singapore Government is exceptional in that it does not borrow to fund its budget. It operates on a balanced budget and retired Singapore's last foreign debt in 1995. The government however issues debt to provide a local risk-free reference rate, support a domestic bond market and provide a guaranteed interest return to the country's self-funding CPF pension scheme. Around USD 350 Billion are borrowed for the above purposes and in turn invested in higher yielding liquid investment assets, not spent.
Thus, Singapore has no net debt but a number of publications, including the CIA World Factbook, have misrepresented gross debt to imply that Singapore is heavily indebted. Refer to "Is it fiscally sustainable for Singapore to have such a high level of debt?" and "Understanding Singapore Government’s borrowing and its purposes" to understand how this misunderstanding arises.
Well Defended and Neutral
With a defense budget twice that of its neighbors, an air force comparable to that of Germany, one of the world’s most modern militaries and over one million active reservists, Singapore is very well defended.
Singapore armed forces have bases in a dozen countries, including Australia, Thailand, New Zealand, India, Taiwan and the USA as way to spread military, particularly air, assets and training facilities. Singapore uses a Swiss style "Total Defense" doctrine which encompasses military, civil, economic, social and psychological defense and even boasts a thriving defense industry. The US Marines for example are currently evaluating 16 Singaporean built Terrex II Amphibious Combat Vehicles which could become the USMC's primary ACV.
Singapore's foreign policy is aimed at neutrality and maintaining friendly relations with all countries. It is a member of several regional defense agreements and has excellent relations with global powers such as USA, China India and Russia. Furthermore, Singapore is the smallest country in Southeast Asia, yet it has one of the world most important ports, refineries, logistics hubs and financial centers making its independence strategically important to major trade powers who see Singapore's stability as crucial for global trade.
Ideal for Wealth Storage
The architect of Singapore's growth, the late Prime Minister Lee Kuan Yew, stated that if he had to choose one word to explain why Singapore succeeded, it would be ‘confidence’.
Singapore has no natural resources so its fortunes were built through good governance, low taxes and a strong legal system that protects private property. These conditions attracted thousands of multinational corporations that located their regional headquarters, trading, production, and R&D facilities in Singapore to take advantage of the optimal business conditions, English language and the highly educated labor force.
Thus Singapore's prosperity is built and depends on maintaining these conditions and to stand as a champion of free markets, meritocracy, people’s rights to progress and private property. If Singapore were to betray these principles it would be akin to an economic suicide and the Government is well aware of this. Singapore will therefore protect these principles to a much higher degree than other jurisdictions and is very unlikely to mandate Singapore courts to enforce blanket foreign nationalizations of Singapore private property. Read our article How Geopolitics Could Make Singapore the Most Important Gold Market for more thoughts on this subject.
In Singapore there are no capital gains taxes nor sales taxes or duties on IPM gold, silver or platinum bullion. IPM bullion is free to move and is not subject to import / export limitations or capital controls. Furthermore, physical assets are not financial instruments under Singapore law and therefore are not subject to the kind of international reporting requirement typical of financial instruments.