President Donald Trump's recent executive order to construct
a wall along the U.S.–Mexico border has sparked concerns regarding the ethical,
practical, and financial aspects of the project. The question of funding the
border wall has been raised, and Trump's proposed solution of heavily taxing or
prohibiting U.S.–Mexico remittances has garnered attention.
According to the World Bank, Mexican immigrants residing in
the United States send approximately $26 billion annually to their families in
Mexico. The proposed legislation by Trump would have a significant impact on
Mexican families relying on these remittances, and it would also affect the
Mexican economy as the inflow of billions of dollars contributes to domestic
spending.
In anticipation of potential legislation restricting
cross-border money transfers to Mexico, remittances from the U.S. to Mexico
reached a ten-year high after Trump's election victory in November. Data from
the Mexican central bank reveals that remittances in November increased by
nearly 25% compared to the same period in the previous year.
Will Bitcoin Emerge as the Solution?
If traditional channels such as banks or major money
transfer operators face heavy taxation or severe restrictions on U.S.–Mexico
remittances, bitcoin remittances could present a viable alternative. Bitcoin
enables users to send and receive money globally at a low cost using online or
mobile wallets, bypassing the need for extensive paperwork when sending money
abroad. This could allow both documented and undocumented Mexican immigrants to
continue sending money to their home country without restrictions, if the new
laws come into effect.
Apart from bitcoin, other anonymous digital currencies like
DASH, Monero, or Zcash could be utilized for cross-border money transfers if
Trump proceeds with legislation targeting bitcoin remittances.
Bitcoin Adoption in Mexico
The primary obstacle preventing bitcoin from gaining a
notable share in the $500 billion global remittance market is the challenge of
converting fiat currency into bitcoin and vice versa while minimizing bid/offer
spread costs. In developing countries, illiquid local exchanges can
significantly increase the cost of remittances, making traditional money
transfer solutions more appealing.
Regarding bitcoin regulation, Mexico has taken a stance
similar to many other countries. In April 2014, Mexico's National Commission
for the Protection and Defense of Users of Financial Services warned about the
risks associated with using bitcoin, stating that it is not legal tender and
lacks regulation by Mexican authorities. While not illegal, the commission
advises caution due to the digital currency's volatility and potential monetary
losses.
Following Trump's election victory, trading volumes on
global peer-to-peer exchange LocalBitcoins and Mexico's leading bitcoin
exchange, Bitso, experienced a substantial increase as Mexican bitcoin users
sought to safeguard their funds from the weakening peso by moving them into a
more stable currency.
If Trump succeeds in imposing strict remittance restrictions
from the U.S. to Mexico, it could serve as a significant case study
demonstrating the viability of bitcoin remittances as an effective means for
cross-border payments.