Mexican remittance tax could lead to Bitcoin boom
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Greg Ruben / Axios
GOP Rep. Mike Rogers on Tuesday said that he will introduce legislation to charge a 2% tax on remittances from individuals to Mexico and other South American countries to help offset costs of President Trump's proposed border wall. It also could unintentionally spark mass adoption of Bitcoin and other cryptocurrencies, which could be used by immigrants to circumvent such rules.
What Rogers said: "It's my understanding that we have over $30 billion a year that are sent in remittances out of this country to South American countries, mostly to Mexico. I intend to introduce legislation entitled the Border Funding Act of 2017 that would put a 2% tax on those remittances, such as Western Union and MoneyGram remittances that would generate close to $1 billion a year."
White House reax: Sean Spicer declined to comment on Rogers' proposal during a press briefing, but his boss has previously indicated an interest in using remittances as leverage.
Why Bitcoin? Rogers specifically cited licensed money transfer companies, and his bill likely would extend to any other financial institution that handles actual currency, such as banks. But Bitcoin isn't legally-recognized currency. It's just code. That means Bitcoin-based money transfer companies like Abra are digital asset custodians rather than financial asset custodians (i.e., they never touch money), and are highly unlikely to be covered under such a bill.
"For starters, the idea of a remittance crackdown is absurd because people will just send money to Canada, which will then route it to Mexico," says a bitcoin entrepreneur. "But if they did somehow figure out how to stop remittances through financial institutions, it would be nearly impossible to write a rule that covers cryptocurrency transfers without also stopping things like American Express membership points and frequent flier miles. They're all just digital ledger entries."
Game theory: Even if the more regulated exchanges do get covered by legislation, immigrants could still conduct individual (and untraceable) transactions via cryptocurrencies. Just look at the recent uptick in Bitcoin volume in Venezuela, which is in the midst of a currency crisis:
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Adapted from Coin Dance
It's also worth noting that Venezuelan authorities have tried to target Bitcoin "miners" via arrests and equipment confiscation, but there still seems to be plenty of local activity.
Isn't it too technical? Not really. A basic Google search can teach someone how to buy and sell Bitcoin, with or without a bank account. After all, if someone comes to the U.S. (legally or illegally) to send money back home, chances are they'll be eager to learn about a technology that lets them send money back home.
Bottom line: "Nobody wants to talk about it, but the number one use case for bitcoin (beyond speculation) is and will continue to be circumventing capital controls," says Ryan Selkis, managing director of CoinDesk. "If the cost of remittance shoots way up in any given corridor, Bitcoin will get more popular."
