El Salvador’s President Naiyb Bukele has posted on Twitter the first data on the use of BTC to send remittances. From these figures, it seems that using the most famous cryptocurrency for this purpose could really save the people of this Central American country a lot of money.
Naiyb Bukele, who introduced the law in the summer, making BTC the world’s first legal tender alongside the US dollar as of September 7, wrote on Twitter:
And if we add remittances (almost $ 2 million per day), the incoming USD QUADRUPLES the outflow.
This is very surprising so early in the game.
– Nayib Bukele 🇸🇻 (@nayibbukele) October 7, 2021
BTC Archive’s Twitter channel changed Bukele’s “tweet” into small ones, stating that BTC is currently used by approximately 9 percent remittances.
It is a transfers of money that goes to a country from abroad from family members or acquaintances who try to improve the living standards of their loved ones in this relatively poor country. In developing countries, remittances in many cases make up a significant portion of GDP.
– BTC Archive 🗄🚀🌔 (@BTC_Archive) October 7, 2021
Gross domestic product in El Salvador is around $ 24.6 billion. Transfers of this amount to up to $ 7.2 billion (Reuters reports 6 billion). As a result, the BTC Archive’s Twitter channel calculated that if $ 2 million a day is being sent via BTC these days, remittances sent through BTC would be $ 730 million a year, while maintaining this trend. That’s just the 9%.
El Salvador stats:
GDP: $ 24.6b
Remittances: ~ $ 7.2b *
– sent with #BTC : $ 730m **
* $ 3.6b in first half 2021
** Current run-rate of $ 2m per day
– BTC Archive 🗄🚀🌔 (@BTC_Archive) October 7, 2021
Transfers can be the best advertisement for BTC
The legalization of BTC in El Salvador in the eyes of foreign countries makes the most sense in connection with remittances, and it is no secret that countries similar to this Central American country are closely monitoring whether this experiment will succeed. If so, they could follow this country.
At present, a lot of money is lost on transfers in the hands of intermediaries of such financial transfers of the Western Union type. In other words, if, for example, a Salvadoran working in the USA wants to send money home to his family, it is possible that the intermediary of this transaction will cut as much as 30% of this money. In some cases, this number may be even higher.
El Salvador therefore decided to use BTC and Lightning Network technology to send dollars. Simply put, the sender of a transaction (such as a family member working in the US) exchanges dollars in BTC, sending them through a wallet supporting the Lightning network transaction to the recipient’s address in El Salvador (such as his mother). Such a transaction comes in a matter of seconds for minimal transaction fees, and its recipient can then exchange these Bitcoins back to dollars almost immediately in BTC machines, which do not charge a fee for this change in El Salvador. With the interaction of both sides, this can be done really quickly, which minimizes the risk that BTC would weaken significantly against the dollar in the meantime. Just to illustrate to regular intermediaries of such transactions, considering the high fees,
Reuters cited the example of construction worker Juan Mozu, who has lived in the United States since 2005. He began using BTC for remittances last month and claims that such a transfer will save him up to $ 18 on average. “I will definitely continue to use it,” he says.
But not everything is amazing
First of all, it should be noted that so far only the data provided by President Nayib Bukele can be relied on in connection with the transfers, which the rest of the world can question in view of his dubious reputation. Especially in the Western world, he is considered a politician close to the dictator’s reputation, mainly because he is consolidating his power in controversial ways, for example by restricting the rights of the El Salvador courts.
In addition, Reuters reported that there were frequent problems with the government’s cryptocurrency wallet Chivo, which not always works exactly as it should. Construction worker Adalberto Galvez, for example, claims that he lost $ 220 while trying to withdraw cash from a Chivo vending machine. “The machine took my money (from the software wallet), but it didn’t give me anything (cash),” he complained. Galvez is not a BTC novice. He has experience with it as part of a project in the coastal town of El Zonta on the famous “BTC Beach”.
Galvez was probably not the first or last Salvadoran to face a similar problem. President Bukele has also admitted that technology has so far failed in some cases. However, the question is whether, in the event of such a problem, the aggrieved citizen will receive some assistance. Galvez claims that no one has responded to his complaint yet.
To what extent do local companies use BTC?
According to the latest survey, about a month after BTC was enacted as currency, only about 7% of Salvadoran companies have so far accepted payment by BTC. In other words, 93% of stores and services have not yet had a personal experience with a customer who would like to pay through a BTC payment.
However, there are also clear examples. For example, businessman Alexander Diaz, who owns a restaurant with chicken wings, said he saw a sharp increase in revenue from his business. ,,Most people who got the bonus ($ 30 in BTC’s Chivo wallet) wanted to try it. They were looking for a place to spend, so I had several clients who paid with BTC. “
Diaz added that BTC is already used by about 20% of its customers for payment these days. “Chivo has benefited small businesses by making it easier for customers to pay,” he added.
We add that, according to President Bukele, 3 million Salvadorans are already actively using Chivo’s wallet, which is about half of the population, including children and the elderly. However, those statistics should also include those who have installed their wallet only to be able to choose a $ 30 BTC as part of a launch campaign to promote it.