Nearly two weeks into his presidency, and Donald Trump has already signed numerous executive orders to make good on several of his major campaign promises. This of course includes the wall, Trump’s highly-anticipated, and sought after plan to curb illegal immigration.
Continue Reading Below
But instead of Mexico paying for the increased border security, it appears that the country will reimburse the U.S. taxpayer for fronting the $12 to 15 billion bill. Whether this is done through a border tax, or perhaps blocking a portion of remittances by changing a rule under the USA Patriot act, is yet to be determined.
If it is the latter, well, Bitcoin might be in for a nice surprise.
“Absolutely. Any bans on the international exchange of money will be a win fall for cryptocurrencies like Bitcoin,” immigration policy analyst at the Cato Institute’s Center for Global Liberty and Prosperity, Alex Nowrasteh, said.
Trump’s proposal would seize a portion of the approximately $25 billion in remittances that is sent to Mexico, until the country agrees to a one-time payment of $5-10 billion.
The White House did not reply to comment when asked to update their stance on the idea of blocking money transfers in order to pressure Mexico into paying for the wall. However, Finance Minister Jose Antonio Meade said Mexico will defend the free flow of remittances, in a report from Reuters on Monday.
Following Trump’s election victory in November, Mexico saw a spike in remittances, with roughly 2.4 billion in money transfers according Mexican central bank data - a near 25 percent increase from the previous year.
One of Bitcoin’s primary functions is a much faster and cheaper way to transfer money internationally. The unregulated cryptocurrency has no central authority and could provide an alternative for undocumented immigrants to continue to send money back to Mexico, even if Trump enforced the rule change.
In other words, a loophole.
“Something similar happened in Iceland – they changed the way people were allowed to transfer money in and out of the country and some guy went out and created his own virtual currency called Auroracoin just to enable these foreign transfer kind of things,” information scientists for the RAND Corp., Joshua Barron, said. “It failed because it was his own virtual currency, he was trying to create his own money. But, I mean it’s a nice idea. You could definitely do it with Bitcoin.”
Another example of Bitcoin being used to bypass government regulation is in Venezuela, where cryptocurrencies are seeing a “large increase” because of the country’s strict currency control, said Nowrasteh.
Daniel Vogel, president and co-founder of Bitso, a leading Bitcoin exchange in Mexico notes that the digital currency poses an “interesting solution.”
People are definitely already using Bitcoin for remittances, but Vogel noted that he hasn’t seen a strong uptick in usage as of yet – mostly because no ban or tax has been implemented.
“I think that’s mainly because the tax on remittances is still unrealized. So maybe once people start feeling the cost of this tax maybe they’ll start looking for alternatives. And, I think the other thing is that there’s still a big educational barrier to getting people to feel comfortable dealing with a decentralized digital currency.”
The state of Oklahoma currently enforces something similar to what Trump is proposing – placing a tax on wire transfers outside the state, which collected over $10 million in 2014 according to a report by the Oklahoma tax commission.
Despite Trump’s determination to get Mexico to pay for the wall as promised throughout his campaign, Nowrasteh doesn’t see a scenario where that happens.
“I don’t think the Mexican government will pay for it, but American consumers, American workers, and American business owners will pay almost all of it,” said Nowrasteh.
President Trump is right. I built a wall along Israel's southern border. It stopped all illegal immigration. Great success. Great idea 🇮🇱🇺🇸— Benjamin Netanyahu (@netanyahu) January 28, 2017
However it appears the border wall is on its way to becoming a reality, garnering support from GOP leaders, including Speaker of the House Paul Ryan, and Senate Majority Leader Mitch McConnell.
Not to mention, Israeli Prime Minister, Benjamin Netanyahu who praised Trump’s immigration plan via a tweet.
People are eager to find out if Trump will follow through on his assurance that Mexico will pay – but if the President is leaning towards blocking remittances as the answer, he might want to think again; Bitcoin could prove to be the crack in the wall.
“You know human beings are very creative and we’ll have to wait and see what they do,” said Vogel.