The 1% Tax That's Teaching Migrants to Send Money On-Chain

Six months ago, the United States started collecting a 1% tax on cash-funded remittances. It was supposed to be a modest revenue line: about $10 billion over nine years, according to the Joint Committee on Taxation, aimed at a $900-billion-a-year flow that Washington had mostly left alone. Instead, the early data out of the largest corridor it touches — the U.S.-to-Mexico flow — suggests it’s doing something the bill’s authors didn’t put in the fiscal notes: pushing money onto rails the IRS has no way to see.

The mechanics of the tax, part of the One Big Beautiful Bill Act, are narrower than they first sound. It applies only when a sender funds a transfer with cash, a money order, or a cashier’s check at a physical counter. Fund the same transfer from a bank account or a card, and you owe nothing. The IRS’s proposed regulations, issued this spring, confirmed that reading and set the compliance mechanics: providers collect the tax, make semimonthly deposits, and file quarterly Form 720 returns, with the first deposits due January 29. Treasury has since granted penalty relief through the first three quarters of 2026 — an admission that rolling this out across tens of thousands of agent counters was never going to be clean.

Who actually pays tells you what kind of tax this is. BBVA Research estimates 84% of Mexican migrants in the U.S. hold a bank account, meaning the large majority of senders have a free, legal way around the levy: fund from an account instead of a counter. The 1% falls on the remainder — newer arrivals, lower earners, people without documentation — who are also the senders least likely to have another option. It’s a tax that exempts the banked and bills the unbanked for using the only channel open to them.

Mexico is the corridor to watch because it’s the biggest one this touches. BBVA Research reported that remittances to Mexico fell 4.6% in 2025, to $61.8 billion, the first annual decline in eleven years after flows had nearly tripled over that stretch. Some of that is genuinely about the U.S. labor market and immigration enforcement — ICE removed 320,000 people in fiscal 2025, the most in twelve years, and a stronger peso made dollar transfers worth less on arrival. But December broke an eight-month streak of monthly declines with a 1.9% rise, a pattern that lines up with senders moving money ahead of the January 1 deadline. Behavior was already shifting before the tax took effect; the tax just gave it a shove.

Here’s the part that should get more attention than it has: a wallet-to-wallet stablecoin transfer doesn’t obviously fall under this tax at all. The statute reaches “remittance transfer providers,” a category built for the storefront model — a counter, an agent, a physical instrument changing hands. A self-custodied transfer has none of that. As Forbes tax contributor Virginia La Torre Jeker has pointed out, a worker who converts wages to a dollar stablecoin and sends it directly to a family member’s wallet uses no provider, owes no excise, and in most cases shows up in no remittance statistic at all. Treasury could try to write stablecoin businesses into the provider definition in the final rules, but exchanges sit at the edges of a self-custodied transfer by design, which makes that harder than it sounds.

This isn’t a hypothetical workaround — it’s already the biggest crack in the corridor’s foundation. Bitso, Latin America’s largest crypto platform, processed $6.5 billion in U.S.-Mexico remittance volume in 2024, more than 10% of the entire corridor, most of it moving as stablecoins, up from $4.3 billion in 2023. That was before the tax existed. There’s also a genuine irony in the timing: the GENIUS Act, which gave dollar stablecoins a federal regulatory framework for the first time, was signed on July 18, 2025 — almost exactly six months before Washington started taxing the cash channel that stablecoins compete with. Congress legalized the rail in July and taxed its rival in January.

The bigger cost here isn’t fiscal, it’s informational. Licensed cash remitters are some of the most closely watched money flows anywhere: FinCEN registration, large-transaction reporting, suspicious activity filings, records regulators mine every day. A self-custodied stablecoin transfer carries none of that. Every dollar that migrates from the counter to the chain is a dollar Treasury can no longer see, on top of one it no longer taxes. And habits don’t reverse easily — a household that learns the on-chain route during a 1% tax has no reason to relearn the counter queue if the tax disappears.

That last point is really the whole story. Once someone in Houston learns they can hold a dollar that never touches a bank and send it home in seconds for less than the price of a stamp, the appeal isn’t really about dodging a 1% fee — it’s that the fee exposed a gap that was already there. Traditional cash remittance in a corridor like this has long carried costs, delays, and friction well above 1%; the tax just made the comparison impossible to ignore.

That’s the gap Koin Remit was built to close, and this is exactly why the design choices matter. A wallet-to-wallet transfer that leaves a family with tokens they can’t spend at the corner store isn’t a real substitute for a remittance — it just relocates the friction to the receiving end, where someone still has to find a reliable way to turn crypto into pesos they can use. The families driving this shift aren’t looking for a clever tax workaround; they’re looking for money that arrives faster, cheaper, and in a form they can actually spend. Building that — compliant rails with real cash-out access on both ends — is a harder problem than routing around a 1% excise, but it’s the one that actually matters for the millions of households this corridor supports.

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