Low-cost remittances were one of the key selling points Salvadoran President Nayib Bukele cited when announcing the law that made bitcoin a legal tender in the Central American nation a year ago.
By using bitcoin transfers through the national Chivo digital wallet, Bukele said that the country could save a fortune annually.
“Our people pay $400 million a year in fees for remittances,” Bukele said when the project launched last October, according to Be In Crypto. “That saving alone will be a huge benefit for our people — or at least for those who want it. There is also the advantage of not having to carry cash. Safer and more practical.”
But Bitcoin remittances never took off, accounting for well under 2% of the total amount received.
They dropped even further in the third quarter of 2022, falling 6% to $32 million from $34.22 million in the second quarter, it added.
Remittances are a vital part of El Salvador’s economy, contributing $7.5 billion in 2021, according to Inter-American Dialogue, an NGO, which cited World Bank figures. That number is estimated to climb to $7.8 billion this year and to account for 27% of GDP.
By the Central Reserve Bank of El Salvador’s figure, 94% of that came from the United States, it added.
That’s a problem given that the country has also spent an estimated $350 million on its bitcoin project between spending an estimated $107 million to buy 2,381 BTC for the national treasury — the country’s paper losses are more than $60 million — as well as the cost of giving every citizen $30 in bitcoin to spur them to download a Chivo wallet, and other expenses related to starting and running the program.
It has also led the International Monetary Fund (IMF) to stop discussing a $1.3 billion loan it needs for a Eurobond coming due at the beginning of 2023. That in turn caused the country’s bond rating to be slashed repeatedly, far into junk territory, as ratings agencies saw the likelihood of default…
