El Salvador embrace of bitcoin will raise people’s wealth while reducing commission costs paid to intermediaries, according to CNBC. President Nayib Bukele anticipates that Western Union and MoneyGram will lose $400 million in remittance fees each year as a result of the country’s embrace of bitcoin.
Inflows of cross-border remittances make for approximately a quarter of El Salvador’s gross domestic product (GDP). Major money service providers profit from this yearly activity by charging exorbitant fees for transmitting and receiving money. To assist pay living expenses or improve their quality of life, many Salvadorans rely on money supplied from family members living overseas.
El Salvador now offers a better choice for its citizens wishing to transfer or receive money internationally after it formally adopted bitcoin as a legal tender on September 7. Salvadorans can now do whatever they want with their money without having to wait in lines, ask permission, or wait several business days thanks to the Bitcoin and Lightning networks, which allow them to send and receive immediate, low-cost payments anywhere in the globe.
“The status quo in our legacy financial system is bad in remittances,” Matt Hougan, Chief Investment Officer of Bitwise Asset Management, told CNBC. “Extremely high fees are levied at populations that can poorly afford them.”
bitcoin: the new hope
Bitcoin is giving millions of people in El Salvador hope and empowerment while also allowing them to save money. Jamie Garca, who fled El Salvador for Canada at the age of 11 when his home was bombed by insurgents, told CNBC how difficult it was to send money to his family in the Central American country using Western Union.
“It’s incredible that in this day and age, I had to go to a physical Western Union office, pay them actual currency, and then hand them another $25 on top of that before they would transfer my money over,” Garca added. “Of course, it takes three days for it to get to El Salvador.”
Garca, on the other hand, stated that while there were significant difficulties on his end, he was most concerned about the procedure his family members had to go through to get the money.
“They have to take a bus to pick it up at a physical site, and there are gangs that hang out around those offices,” Garca explained. “They figure out what people are going there for and rob them.”
However, households that receive remittances on a regular basis, which account for more than half of their overall income, now have a more cost-effective and safe method of money transfer. Bitcoin has the potential to relieve Garca of his fears and concerns while also providing protection for his family. To enable rapid, safe, sovereign global money transmission, the permissionless peer-to-peer monetary network requires only a cell phone and an ordinary internet connection, rendering clunky organisations like Western Union irrelevant for that use case.