If you're from El Salvador living and working elsewhere in the world, Bitcoin wallet adoption in the country fixes an age-old problem that clunky money-transfer companies like Western Union used to have to solve: getting money back home.
According to CNBC, about 70% of the Salvadoran population receives remittance payments that could now be transferred using Bitcoin.
Jaime García of Saskatchewan, who left El Salvador after his house was bombed by rebels, told CNBC: “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," he continued.
Then, back in El Salvador, collecting also becomes a problem: “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.”
Last year, more than $6 billion, or about 23% of the country's GDP, was sent back home from the 2.5 million who have fled El Salvador. "60% of that cash comes via remittance companies and 38% through banking institutions," CNBC reported, citing official data.
The shift in how payments are made could wind up costing money transfer companies up to a billion dollars, Mario Gomez Lozada estimated. Lozada was born and raised in El Salvador, has previously worked as a banker with Merrill Lynch and Credit Suisse and now works running a derivates exchange for crypto assets.
Lozada said: “It will be interesting to see the impact on remittances in a few months and see what percentage of it uses the bitcoin network rails. My guess is most people initially will cash bitcoin into U.S. dollars, as this is what they are used to, but we should see a gradual adoption of bitcoin as the main means of transaction and pricing. I see a future where consumer items like milk and bread are priced in bitcoin directly and people might even start holding bitcoin.”
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.”
He continued: “It won’t be overnight; 100% of remittances aren’t going to move to the Chivo app tomorrow. These things take time, and people naturally worry about trying new things with money. But the current fee levels of charge for remittances are going to prove unsustainable.”
Alex Gladstein, chief strategy officer for the Human Rights Foundation, said: “Wherever you are now, you can send bitcoin to anyone with a Chivo wallet in El Salvador, and in minutes, they have the value and then they can go to one of the ATMs and take it out in cash without a fee. That’s drop-dead stunning. It’s an incredible humanitarian improvement.”
Hougan concluded: “It’s a worn-out Twitter saying, but bitcoin really does fix this."