Bitcoin can make a huge splash in areas where financial infrastructure is difficult or impossible to access for everyday consumers. There are plenty of underbanked and unbanked countries around the world and plenty of opportunities for Bitcoin adoption to grow. Sometimes, a helping hand from an unwilling partner might do the trick as well. Paypal is no longer offering their services in Puerto Rico, opening the door for Bitcoin to take its place.
Paypal Exits Puerto Rico After Policy Update
Online payment services have become an integral part of the lives of everyday consumers. Paypal, one of the world’s most popular online payment platforms, has become a household name is nearly every country around the world. But sometimes, even companies like Paypal have to rethink their business model and cut their losses in certain countries.
Person-to-person payments will no longer be available for payments sent from Puerto Rico, starting on October 30, 2015. The reason for this decision by Paypal is quite simple: the Puerto Rican legislators decided to raise person-to-person transfers taxes by an additional 2%. Even though this change had been coming for quite some time, it will only come into effect by the end of October.
It goes without saying that this additional transaction taxation is taking a large cut out of Paypal’s profits. Considering the average Paypal transaction is subject to a 2.5% fee, Paypal would lose 80% of that profit due to this new legislation. For any business around the world, that is a clear sign to pack a bag and take business elsewhere.
Industry experts see this legislative decision as an attempt to create capital controls on Puerto Rican funds. Moving funds out of the country has now become increasingly difficult and the conversion to other fiat currencies will be all but impossible come November. The term “capital control” seems to fit the bill perfectly, as there is no proper way to move funds out of the country through a person-to-person transfer;
“It is necessary to establish recurring sources of income by imposing special charges on certain transactions carried outside and inside the jurisdiction of Puerto Rico. It is in the public interest to impose charges on transactions originated in the local jurisdiction involving assets that no longer circulate in the local economy.” – Puerto Rican Act
Huge Opportunity for Bitcoin, or Not?
Now that Paypal is withdrawing their services from Puerto Rico, local residents will be looking for alternative ways to move funds in and out of the country in a quick and convenient manner. Many people see this change as a huge opportunity for Bitcoin, even though things might not be as easy as these people would like to think.
Contrary to popular belief, the Puerto Rican Act indicates this same two-percent tax will apply to all forms of person-to-person monetary transmission. Unfortunately, this would also include Bitcoin payments, as this form of transmission embodies the entire concept of person-to-person transactions.
That being said, it will be all but impossible for government officials to deduct taxes from Bitcoin payments, as there is no central authority to control the funds. Furthermore, the only fees associated with Bitcoin are the transaction fees for miners, which can not be altered unless there is a majority network consensus. In this case, that consensus will – most likely – never happen.
Images courtesy of Paypal, Shutterstock