As we mentioned in our articles this week about El Salvador a Afghanistan, transfers, ie the money that relatives send to their families across borders, are a burning problem in many poor countries. In fact, the fees for these transfers will result in huge sums of money for the benefit of third parties, which they could save if there was an alternative solution. And just such a solution is to use BTC in El Salvador. Therefore, other countries are monitoring the situation very closely.
Central American countries are waiting
Reuters reported that Central American countries are very eagerly awaiting the use of BTC in El Salvador after September 7, when it will become the world’s first legal tender in the country. On that day, the official Chivo Wallet wallet, 200 BTC ATMs and 50 exchanges for two-way exchange of BTC and the US dollar will be made available to citizens in El Salvador. These services will not charge any change fees.
Salvadorans are estimated to receive remittances worth around $ 400 million a year. Now, thanks to BTC, they will have the opportunity to save fees on this money. Their loved ones abroad can send them BTC and they will then be able to exchange it into the US dollar free of charge through the mentioned services (or keep BTC, that’s up to them). And really very quickly and at a much lower cost than transferring money with the assistance of third parties such as Western Union.
“Everyone is watching how this will work in this El Salvador and whether the cost of remittances will drop significantly. Other countries are likely to notice this adoption and adopt it. “ Dante Mossi, executive president of the Central American Bank for Economic Integration (CABEI), told Reuters.
Mossi said that El Salvador’s decision to legalize BTC as currency was an experiment that the world had not yet experienced. However, CABEI decided to help. It did so, unlike the World Bank, which rejected El Salvador’s request for assistance with the integration of BTC on the grounds that it had doubts about BTC’s transparency and its impact on the environment.
Other countries for which the use of BTC in remittances could be very advantageous are Guatemala or Honduras. President CABEI revealed that at a recent meeting of the Central American Monetary Council, which is part of the Central American Integration System (SICA), several Member States asked for more details about BTC and showed strong interest in the subject.
CABEI is assisting El Salvador, in particular in preparing the appropriate legal framework. In particular, it ensures that BTC’s use in the country is in line with international anti-money laundering protocols. However, El Salvador is also assisted by other legal issues related to this issue. “We help them navigate in waters that have not yet been explored,” added Carlos Sanchez, CABEI’s Director of Investment.
Interesting numbers about remittances
- Salvadorans receive remittances worth around $ 400 million a year
- Afghans receive transfers of up to $ 800 million (4% of GDP). Now, however, Western Union has left the country after the Taliban took power, which means that the people of Afghanistan are cut off from important money. This only underscores the advantages of BTC over remittance intermediaries. We wrote more about it here.
- BTC currently accounts for about 1% of remittances (Autonomous Research). Cryptocurrencies are expected to gradually cut a more prominent piece of this cake
- According to the World Bank, over $ 646 billion was transferred to private remittances in 2020