El Salvador is located in Central America, and is home to about 6.4 billion people. Its citizens have a number of problems with receiving money from other countries. However, cryptocurrency Bitcoin can greatly alleviate those problems.
This is because El Salvador receives annually up to six billion US dollars in remittances from abroad. Remittances sent by expatriates to their families and friends inside the country. These remittances represent 23% of the country’s GDP.
Citizens have a very difficult experience with foreign remittances. Especially since most of it is done through money transfer companies such as Western Union, and not relying on bank transfer.
The first problems they suffer from is that the remittances need three days to reach El Salvador, with the payment of exorbitant transfer fees, in addition to that the biggest problem is that the recipient has to go to the local Western Union branches to receive, which is a dangerous process, as these branches are surrounded by gangs and looters, so There is a high chance that the money will be stolen from them once they leave the branch.
Also Read: El Salvador Becomes the First Country to Adopt Bitcoin as an Official Currency
El Salvador’s challenges with money transfer
Western Union is known as the leading player in the field of money transfer around the world. However, the company deducts significant transfer expenses upon conversion. Transferring $100 to El Salvador requires paying a transfer fee of $12.5.
The problem of remittances was one of the problems that prompted the President of El Salvador to the origin The Palestinian, Najib Baqila, has come to rely on Bitcoin as the country’s official currency, along with the US dollar, of course.
It clearly shows the interest of the Salvadoran president and the government in general in the cryptocurrency Bitcoin. The government has launched a local Bitcoin wallet that is available to all citizens. Which was known as Chivo, which is a Salvadoran word that means Cool in English, wonderful in Arabic.
Once a Salvadoran citizen applies for this wallet, he receives $30 in it as government support. Which is a lot of money given that the minimum income in El Salvador is $365 per month.
Also Read: Everything You Need To Know About Bitcoin Wallets
Chivo Wallet solves the aforementioned money transfer problem. As it will spare the sender from paying the transfer expenses, and will spare the recipient from going to the branches and bearing the risks surrounding them.
Relying on Bitcoin as a Currency
It is noteworthy that external remittances are of paramount importance in El Salvador. As 70% of citizens depend on remittances that reach them from abroad on a monthly basis. Remittances represent, on average, half of total household income.
In addition, 60% of the money transferred from abroad reaches the parents through money transfer companies such as Western Union and MoneyGram. While 38% of those transfers arrive via bank transfer.
Western Union’s transfer fees have reached a very high level. Transferring $10 from Canada to El Salvador will require a 33% payment. That’s just $3.24 as a transfer expense.
Also Read: Ukraine Legalizes Bitcoin
It is estimated that money transfer companies will lose up to $400 million per month when El Salvadorans fully rely on Chivo’s e-wallet. Some sources predict that the number will reach one billion US dollars.
Western Union declined to comment on the matter. She also refused to say whether she was afraid of the new Salvadoran transfer method or not.
On the other hand, the way Chivo wallet works is going to be simple. As the transfer from one wallet to another – that is, from one citizen to another – will be free. Funds will also be withdrawn through dedicated ATMs. More than 200 new Chivo Coin ATMs have been distributed to the most important regions of the country.
Read also: Bitcoin combines the properties of technology and currencies
Quite simply, the citizen will use his wallet to withdraw the amount he wants in US dollars immediately. He will not need to sell bitcoins himself. Whereas all balances are in Bitcoin.
So far, we don’t know how things will work out in El Salvador. We do not know whether the main goal of relying on Bitcoin and providing a dedicated wallet is to provide ease and speed for citizens, or if the responsible authorities have other goals.
Also Read: Bitcoin Drops As El Salvador Is Adopted As Currency