- El Salvador's adoption of Bitcoin as a national currency poses a threat to money service providers Western Union and MoneyGram.
- Nearly 1.75 million Salvadorans receive remittance payments every year.
- The Salvadoran government rolled out "Chivo," a virtual wallet that powers cross-border payments and no-fee transactions.
Mario Gomes Lozada, a former Merrill Lynch and Credit Suisse banker, estimates that the combined loss in revenue for MoneyGram and Western Union will be close to $1 billion.
"Chivo" set to increase Salvadoran population’s wealth
In 2020, Salvadorans received close to $6 billion in remittances from friends and family abroad. Nearly 70% of El Salvador's citizens receive cross-border payments and pay up to $440 million in fees to payments giants.
Personal remittances received as a percentage of GDP
One of the leading factors in the adoption of Bitcoin as legal tender was the prospect of reducing the cost of accepting cross-border payments and increasing the overall wealth of the Salvadoran diaspora.
Matt Hougan, Chief Investment Officer of Bitwise, commented on the utility of BTC for remittances,
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.
The government introduced a virtual wallet, "Chivo," that offers commission-free borderless payments. Proponents consider that the implementation of Bitcoin in the country will not be easy; however, it remains to be seen how Salvadorans tackle the challenges of adopting new-age money.
If payment giants wish to remain relevant and compete with "Chivo," they will need to lower their commission. Despite initial glitches and roadblocks, El Salvador's virtual wallet is now the number one finance app on the play store as the masses continue to embrace Bitcoin.
Experts have cautioned Salvadorans in embracing the new virtual wallet, stating that the wallet is nearly as centralized as a bank, and the government can freeze it at any time. Bitcoin represents decentralization, and storing it in a centralized wallet downplays its purpose.
Crypto traders and influencers are urging people to move their funds from "Chivo" once they receive it. This is likely to limit centralized control on user's BTC holdings.
Dennis Porter, host of Bitcoin show "Smart People Shit," identifies El Salvador's Bitcoin adoption as a positive feedback loop set to increase people's wealth.
Bitcoin will save El Salvador’s economy $400 million per year which will increase their GDP and help Salvadorians buy even more bitcoin which will increase their savings and capital investment which will once again increase GDP and bitcoin holdings.
— Dennis Porter (@Dennis_Porter_) September 9, 2021
I positive feedback loops.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Bitcoin recovers slightly amid sparse on-chain data signals
Bitcoin trades just above $57,000 on Tuesday after gaining almost 4% on Monday, buoyed by mild ETF inflows, increasing whale buying activity during price dips, a long-to-short ratio above one, and increasing stablecoin holdings on exchanges.
Solana on-chain metrics suggest rising activity and declining fees, supporting bullish outlook
Solana on-chain activity shows signs of growth in the last thirty days. Daily active addresses grow threefold, rising to 3.11 million on Monday. The number of new addresses on Solana in the first ten days of September is more than half of that registered in August for the entire month.
Rocket Pool jumps 23% after Binance announces launch of perpetual contracts
Rocket Pool surged more than 23% as Binance announced a perpetual contract listing on Monday. At the time of writing on Tuesday, it trades slightly up at $11.74. This bullish event is further supported by RPL’s rising open interest, which indicates new buying activity in the market.
ApeCoin set for a surge as on-chain and price trends signal a bullish rally
ApeCoin price validated a double-bottom pattern, signaling a bullish move. On-chain data paint a bullish picture on APE’s rising open interest, negative exchange flow balance, and decreasing supply on exchanges.
Bitcoin: $50,000 on the horizon if it breaks below key support level
Bitcoin (BTC) price tests the key support level at $56,000 on Friday, consolidating over a 1% decline this week. If it drops below this support, a continued downtrend is likely for BTC, as suggested by substantial outflows from US spot Bitcoin ETFs, rising institutional selling, and bearish on-chain indicators.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.