Each month, Salvadoran tailor Julio Ramirez receives a small wire transfer from his two daughters in the United States, who have to pay a few dollars in commission fees for the transaction.
As of Monday (September 6), El Salvador’s government says its historic adoption of bitcoin as legal tender will save Salvadorans living abroad millions of dollars in transfer charges if they instead use the cryptocurrency to send their money home.
Over 2.5 million Salvadorans live abroad – mostly in the United States – and in 2020 they sent back almost $6 billion, equivalent to 23% of the country’s gross domestic product.
But Ramirez, who has a small workshop in Colon, a poor municipality 19 kilometers (12 miles) west of the capital, San Salvador, said neither he nor his daughters in California have any intention of using the digital currency. They view it as a liability.
From Tuesday, Sept. 7, El Salvador will become the first country in the world to recognize the cryptocurrency as legal tender. President Nayib Bukele has said any Salvadoran can download the government digital wallet “CHIVO” – a local word meaning “good” – to accept payments in bitcoin or dollars. Having installed the app on their phones, they will be able to withdraw dollars from government-backed cash machines.
Polling suggests that Bukele, 40, is the most popular president in Latin America. But three months after he launched his bitcoin plan, skepticism about it remains widespread with surveys showing most Salvadorans opposed to its adoption.
Bukele argues the cryptocurrency will make Salvadorans better off and stresses that using it is optional in the impoverished, dollarized Central American country.
“Our people pay $400 million a year in commissions for remittances,” the president wrote on Twitter in August. “That saving alone will be a huge benefit for our people (or at least for those who want it).”
But Ramirez said that even if his daughters were charged “maybe $10 to $15 for every $100” sent home, bitcoin’s volatility and the lack of information on the currency meant it was not a viable option. The tailor said he receives about $150 a month.
Many Salvadorans polled in a recent Central American University study argue it will only benefit the rich, foreign investors, the government, business people and banks.
Most of the money sent back to El Salvador in 2020 was from the United States, followed by Canada, Spain and Italy. Of the total sum, 61.4% came through remittance companies and 37.8% through banking institutions, according to official data.
A 2015 Central Bank study showed that over one-fifth of Salvadoran households rely on remittances to get by, and the government is doubling down on the bitcoin strategy.
(Production: Wilfredo Pineda, Manuel Carrillo, Nina Lopez)