El Salvador has made a lot of headlines in the past few months after adopting bitcoin as a legal tender and becoming the first country to add bitcoin to its portfolio.
A recent report from CNBC has revealed that several remittance providers like Western Union can lose a lot of money, a whopping $400 million monthly, once Salvadorans adopt bitcoin on a large scale.
In El Salvador, about 70% of the population relies on remittances from their relatives living abroad and for some people, it makes up about 50% of their total income.
As per the report, these remittances from abroad account for nearly a quarter of El Salvador’s GDP, about 23%.
Several major remittance providers take advantage of this large annual money movement to charge hefty fees for sending and receiving transactions, some charge as much as 12.5% for sending $100.
Not only do these companies charge hefty fees, but the money also takes too long to get to the owners, in some instances, a couple of days.
Jaime García, a Salvadoran currently living in Canada and serving as the head of a team of researchers at SGI Canada Insurance, told CNBC of the hassle involved in sending money to his family in El Salvador.
He said. “In this day and age, it is wild that I had to go to a physical Western Union office, give them actual cash, and then hand them another $25 on top of that before they would send my money over. And then, of course, it takes three days for it to actually arrive in El Salvador.”
García, however, noted that he was mostly concerned about what happens when his family goes to get the money. “They have to take a bus to go to a physical location to pick it up, and there are gangs that hang out around those offices. They know what people are going there for, and they basically rob them.”
Since legalizing the use of bitcoin in El Salvador, citizens have the option of sending and receiving money at extremely low fees, little time wasted and increased security.
Matt Hougan, Chief Investment Officer of Bitwise Asset Management, told CNBC. “Remittances are one area where the status quo in our legacy financial system is terrible, with extraordinarily high fees leveled at populations that can ill afford them. It’s a worn-out Twitter saying, but bitcoin really does fix this.”
The $30 worth of free bitcoin given to Salvadorans using the Chivo wallet gives them an added incentive to adopt the digital asset.
Now, citizens who receive remittances can withdraw their funds from any of the bitcoin ATMs scattered across the country.