Will Bitcoin Reduce Remittance Costs for El Salvador?
The recent decision of El Salvador authorities to adopt Bitcoin as a parallel legal tender in the country has initiated a stream of speculations, predictions, and responses from governments across the world. In a statement released by the Central American Bank for Economic Integration (CABEI), countries hailing from the Central Asian cluster are looking forward to the implications of El Salvador’s decision. They are anticipating the effect of Bitcoin’s adoption as a legal currency in reducing the cost of remittances that works as an income source for a substantial percentage of the population.
For the unversed, the legislation to give Bitcoin the status of a legal tender in El Salvador alongside the U.S Dollar was approved by the Legislative Assembly on June 8, 2021. This decision by President Nayib Bukele and his office is a first by any government or country. The Act will come into force in September. During an interaction, the honorable President stated that through Bitcoin adoption they are planning to ease the remittance system for Salvador natives living in different parts of the globe.
Talking about the step, Mr. Dante Mossi, the executive president of CABEI, revealed that governments are looking forward to the results of this financial shift with a vigilant eye. If the decision manages to cause a reduction in remittance costs, then other countries would willingly incorporate and adopt it in their clusters too. He addressed it as a unique experiment that would promote financial inclusion in a state where people lack basic banking facilities.
According to a report by Autonomous Research, less than 1% of the sum of global cross-border remittance volume comprises crypto. However, predictions reveal that values can surge and reach $500 Billion worth in the future. Countries like El Salvador, Honduras, and Guatemala will fetch good results with reduced remittance costs via the Bitcoin channel.
Where World Bank denied support to the experiment citing various concerns, CABEI offered technical aid for crypto implementation. Carlos Sanchez, the head of investments, said that the team is happy to help El Salvador in bringing Bitcoin to mainstream business in a regulated setup. The bank will ensure that developers follow the guidelines of the international money laundering protocol. Mr. Mossi conveyed that a lot of enquiries about El Salvador’s decision came to them when the bank participated in the recently conducted meeting of the Central American Monetary Council.