Central American countries are eagerly awaiting to see if El Salvador’s adoption of Bitcoin as a parallel legal tender reduces the cost of remittances, a major source of income for millions of people, according to the development bank of the United States. region.
President Nayib Bukele’s allies in Congress have already approved legislation giving cryptocurrency official currency status alongside the US dollar, a world first. The move takes effect in September.
Bukele touted the adoption of Bitcoin as a way to facilitate remittances for Salvadorans living abroad.
“Everyone is watching if everything is going well for El Salvador and if, for example, the cost of remittances drops significantly… other countries are likely to seek this advantage and adopt it,” Dante Mossi, executive chairman of the Bank. Central American economic integration. (CABEI), Reuters news agency said on Wednesday. CABEI is an international multilateral development finance institution headquartered in Honduras.
Mossi called the plan an “extraordinary experiment” to increase financial inclusion in a region where many people do not have access to bank accounts or credit cards and depend on money sent by. parents living in the United States.
CABEI, the regional development bank, is providing technical assistance to El Salvador for the implementation of cryptocurrency, a major show of support as the World Bank refused to help, citing environmental drawbacks and transparency.
The bank’s technical assistance aims to help El Salvador design a legal framework for the adoption of Bitcoin and ensure that strict international money laundering protocols are followed.
The aid is intended to help El Salvador “navigate waters that have yet to be explored,” said Carlos Sanchez, chief investment officer of CABEI.
Mossi said the Central American countries that receive the most remittances are the ones that prioritize the use of Bitcoin the most and stressed that CABEI has a “fiduciary duty” to support El Salvador in its request for aid.
“Guatemala, Honduras and El Salvador are the countries that stand to gain the most if the adoption of Bitcoin reduces the cost of remittances,” Mossi said.
CABEI participated in a recent meeting of the Central American Monetary Council, which is part of the Central American Integration System (SICA), where participants asked about El Salvador’s Bitcoin plans and discussed expressed interest, he added.
The Central Bank of Honduras referred Reuters to a June 11 statement that the bank does not prohibit, supervise, or guarantee the use of cryptocurrencies as payment methods in the country.
The governments of Guatemala and Honduras did not immediately respond to a request for comment.
El Salvador has started installing Bitcoin ATMs, allowing its citizens to convert cryptocurrency to U.S. dollars and withdraw it for cash, as part of the government’s plan to make the token legal tender.
The government will install 200 ATMs to initially accompany its digital wallet called Chivo, a local slang term for “cool,” President Bukele said on Twitter on Sunday. Transactions will be commission-free, he said, adding that there will also be 50 financial branches across the country to withdraw or deposit money.
Adopting Bitcoin will save Salvadorans $ 400 million a year in fees for receiving remittances from abroad, Bukele said.
According to Autonomous Research, less than 1% of the volume of global cross-border remittances is currently made in cryptocurrencies, but in the future, cryptocurrencies are expected to account for a larger share of the more than $ 500 billion. global annual remittances.
Bitcoin offers, in theory, a fast and inexpensive way to send money across borders without resorting to traditional channels.
Salvadoran Bitcoin law will come into effect on September 7 and Salvadorans will be able to download the government’s Chivo digital wallet, enter their ID number and receive $ 30 in Bitcoin, Finance Minister Alejandro Zelaya said in an interview with local television. The government has created a $ 150 million fund to support Bitcoin to U.S. dollar conversions, he said.