The role of offshore centers in the system of modern global finance

Offshore financial centers (OFCs) constitute a crucial yet controversial component of the modern global financial system. They serve as specialized jurisdictions offering favorable tax regimes, financial secrecy, and regulatory flexibility that attract multinational corporations, financial institutions, and high-net-worth individuals. This paper explores the evolving role of OFCs in facilitating international capital mobility, tax optimization, and asset protection, while simultaneously raising concerns over inequality, tax evasion, and systemic risk. Drawing upon economic theory and empirical evidence, the study assesses both the benefits - such as liquidity enhancement and investment efficiency - and the challenges posed by offshore finance to global economic governance. By analyzing historical evolution, current functions, and emerging regulatory trends, the paper contributes to a nuanced understanding of OFCs’ dual role as enablers of financial globalization and sources of regulatory arbitrage in the 21st century.