El Salvador recently made news as the first nation in the world to recognise Bitcoin as a legal tender. This means the digital currency can work in the country like any other traditional currency such as the US dollar.
At the time, the decision seemed like a method to boost the country’s ailing economy – the government was looking to inject some new money flows into the economy. However, it now appears remittance payments will also see large growth from the move to use Bitcoin as a legal tender.
A new study has found that the successful implementation of the Bitcoin proposal would see money transfer services like Western Union potentially lose up to 400 million per year.
Bitcoin remittance payment solutions
With more than 70% of the El Salvador population receiving money from overseas, money transfers services play a huge role in the economy. The current system however comes with various challenges.
The first major concern that comes with traditional cross border money transfers is the cost of transactions. For example, if someone intends to send $100, they have to pay $25 as transaction fees. This means less money the receiver is able to access. Bitcoin transfers however can be much cheaper.
The other way Bitcoin payments will make money remittance better in El Salvador is convenience. To access money sent from overseas, one has to visit the office of the money transfer service. In most cases, this involves travelling by bus and other forms of transport. At the same time, various gangs are strategically placed around these physical offices looking to fleece money from the recipients.
Digital currencies come with convenience. Already, most of the population have access to mobile devices and the internet. They can use these to access crypto exchanges and other crypto payment services.
The speed of transactions that comes with Bitcoin payments is another solution. It takes time for both the sender and receiver to visit the physical money transfer service offices. However, with digital transactions, the transfer happens almost instantly.
How fast will the population embrace BTC for remittance?
Given all the solutions that come with using BTC for remittance, it might feel like the country would move in droves to digital currency use. The truth though is that it will take time.
First, the president has to ensure the new Bitcoin directive becomes the law. Already various programs are in line to ensure the population has access to Bitcoin. For example, they have offered the crypto wallet Chivo as the nationally accepted storage platform.
To achieve mass adoption, the country must move past the political forces opposing the new laws. It must also convince the International Monetary Fund (IMF) of the viability of the project. At the same time, there’s a need for crypto education among the population. Most El Salvadorians don’t understand how Bitcoin operates.
It will take time before the masses accept Bitcoin for remittance, however, once it becomes mainstream, it will come with multiple benefits.
