Remittance services in El Salvador take a cautious stance on Bitcoin support

Only a small number of remittance services in El Salvador have integrated Bitcoin support, as required by the law recognizing digital gold as legal tender. Reuters reports.

On June 9, the country’s Legislative Assembly granted Bitcoin the status of an official means of payment on a par with the U.S. dollar.

The restrained reaction of entrepreneurs to the authorities’ initiatives can be linked to the risks of reduced fees on traditional payment channels. This is according to Autonomous Research analyst Kenneth Suchoski.

According to the expert’s assessment, at present only 1% of transfers worldwide are conducted in cryptocurrencies. He is convinced that this figure in the $500 billion-a-year market will continue to grow.

“To the extent that Bitcoin hasn’t achieved broad adoption, demand for the services of these financial-service providers [for example, Western Union] will remain in the coming years,” he explained.

MoneyGram representatives told Reuters that they have not seen interest in cryptocurrency transactions yet.

“We built a bridge between Bitcoin and local fiat. This is the main barrier to popularising cryptocurrencies,” said the company representatives.

Suchoski said Western Union’s attempts to broaden its digital assets service line have so far not paid off.

Reuters notes that the shift to cryptocurrencies poses a serious challenge, even as the COVID-19 era enabled a rise in online business. In 2020, the volume of cross-border transfers via mobile phones rose by 65% to $12 billion.

“I find it hard to see how they\’ll compete unless they cut their fees. You can\’t compete for free,” commented Paxful CEO Ray Yousef.

The publication notes that in the fourth quarter of 2020 the average cross-border transfer fee was 6.5%, according to the World Bank. This is more than double the цель set by the UN for sustainable development by 2030.

Suchoski explained the slow decline of the metric by rising costs of AML/CFT compliance. He estimates that Western Union’s such costs doubled over ten years—to $200 million.

ForkLog experts doubted the positive impact on El Salvador’s economy from recognizing Bitcoin as a payment method. JPMorgan analysts came to similar conclusions.

The IMF said that such a decision could potentially create a number of risks and regulatory issues.

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