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The big bill propels another currency de facto, |
The Trump administration has introduced a bill "One Big Beautiful Act", suggesting imposition of 5% tariff on all kinds of outward remittances. There is widespread fear here that it would lower the remittances from the USA. It is too early to make such comment. The decision would undoubtedly allow the US govt to bag huge amount of revenue to address its huge deficits.
The tariff debate, weakening of US dollar , tax on remittances hint that the US want to ease the pressure on US dollar demand. At the same time, it would encourage alternate mode of transfer. Cryptocurrency witnesses unprecedented surge after having severe regulatory restrictions across the globe. Weakening of dollar also means reduced purchasing power of the holder of dollar denominated assets. One would [in] such scenario try to convert the money into other currencies or invest in assets where one's money will grow. If one wants to invest abroad in spite of having serious restrictions at home or wants to avoid political controversy ,alternate mode of transfer and exchange would become popular. So here the cryptocurrency comes into play. Following the onset of the war in Europe, many billionaires in Russia and China transferred their wealth abroad in the face of severe restrictions at home. Weakening Yuan may be good for competitiveness but it also hit hard the purchasing power of the rich if their assets are in Yuan. In addition, there is a thing called "portfolio risk" that may hurt balance sheet of the company if its domestic return on investment is too low compared to return on investment abroad. Sometimes it casts shadow over the existence of the company. That is why there is a tremendous rush to invest/ transfer wealth abroad. As govt regulations become rigid, many try to depend on alternate mode of transfer like crypto / bitcoin in order to avoid controversy. As more people switch to this mode of transfer, it becomes mainstream and calls for global convention for its operations. In the past, organized criminal groups used this channel due to lack of global convention. Future of bitcoins depends on how this mode of transfer/exchange behaves in a world of rising protectionism and growing demand for deregulation. This is where the US tax on remittances [sets] the course for further revival of this alternate mode of transfer.
The UAE based exchange houses raised fees by 15% for outward remittances in 2024. But they kept the money-sending apps out of this regulation( For more see "Remittance Er Mashul 15% Briddhi Korbe Arab Amirat,Probashider Khoroch Barbs(UAE To Raise Fees For Remittances By 15%,Migrant Worker's Cost Will Rise)", Daily Ittefaq,April 9,2024). Despite the fee hike, the UAE became the second highest remittance source for Bangladesh in 2024. The rise in fees did not have severe impact on remittances for Bangladesh.
Imposition of tax on remittances will raise the cost for remitters. It will also eat away the gain of speculators and opportunistic groups who launder money abroad through trade invoices and remit back the money to siphon off govt subsidies. Free floating of Taka has made that money laundering activity even more costlier.
The remittance tax also made the prospect of launching apps for sending money by Bangladesh Bank /local bank even brighter. It will gain the trust of the remitters and prevent the accumulation of funds into wrong hands.
The tax on remittances at one hand resurrects the bitcoin by drawing people and popularizing it, and on the other hand opens up new opportunity in Bangladesh by preventing the money laundering activity. Drawing the lessons from UAE changes, we hope that this change will also bring good to us.