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Picture of a bitcoin next to an El Salvador flag

By The Numbers: How Much Western Union And MoneyGram Will Lose From El Salvador’s Bitcoin Law

Best Owie
by Best Owie
3 years ago
·
Posted in Bitcoin
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

El Salvador is now on its third day with bitcoin being legal tender in the country. There have so far been numerous testimonies of how the law has worked so far. With residents posting evidence of the ease of spending bitcoin in the country since the implementation. Stores have also implemented bitcoin payments in the country. With the likes of McDonald’s and Starbucks now accepting bitcoin payments in El Salvador.

One aspect that is yet to be addressed is how the implementation will affect existing remittance services in the country. Remittances were a big point for the argument of bitcoin adoption in the country. It was explained that sending money from overseas to El Salvador was cheaper with bitcoin. And now that it functions as a legal tender in the country, it is important to look at how this will affect existing companies like Western Union and MoneyGram.

Bitcoin Is A Better Way To Remit

Smaller countries like El Salvador owe a significant percentage of their economy to remittances. It is estimated that in 2020 alone, remittances from citizens overseas accounted for 23% of the gross domestic product of the country. Making it a major economic contributor in the country. Remittances alone in 2020 came out to $6 billion, of which the remittance services which are used to send these monies take a percentage as fees.

Related Reading | Popular YouTuber MrBeast Reveals Significant Crypto Holdings, Here’s What He Has

With bitcoin though, the middleman, in this case, Western Union and the likes, are completely removed from the process. The funds sent go directly to the recipient without the need for a processing fee to a third party. It is estimated that these remittance companies are set to lose about $400 million a year when remittances are routed through bitcoin instead.

It cannot be underestimated how important remittances are to the nation-state of El Salvador, which is why the remittance industry is booming in the country. With an approximate 70% of its population receiving remittance payments from overseas, bitcoin payments will save citizens millions of dollars in commissions being paid to third-party remittance services.

Bitcoin price chart from TradingView.com

BTC price falls to $45k | Source: BTCUSD on TradingView.com

Using Crypto In El Salvador

The first day of the official implementation of bitcoin as legal tender in the country was dubbed “Bitcoin Day” by President Nayib Bukele. In commiseration of the historic event, the country of El Salvador had bought an additional 150 bitcoins, bringing its total bitcoin holdings to 550 coins.

One Twitter user known as Bart Mol took to the platform to show how “Bitcoin Day” was going. Mol posted updates with both pictures and videos to show how the implementation had been received by the citizens. The majority of the citizens seem to be quite all right with it. But there were small protests around the country against the implementation.

Related Reading | Cardano Founder Charles Hoskinson Praises El Salvador, Says Countries Need Crypto Strategies

Other problems included the government-issued crypto wallet Chivo not working properly. And the bitcoin ATM machines had run out of coins, which made it impossible for people to spend their bitcoins. But payments being made on the Lightning Network had the best success. Mol posted that he had been able to pay for a pizza at Pizza Hut for a tiny fee.

Notwithstanding the problems encountered on the first day, the world still looks on eagerly towards El Salvador. The use of crypto as an official legal tender is a momentous event. And as Mol put it, “This is the future.”

Bitcoin looks set to take over remittances in El Salvador. How long do you think it will take for it to become a global reserve currency? Let us know your thoughts here.

With #Bitcoin becoming legal tender in #ElSalvador, how long until it becomes the global reserve currency? @nayibbukele

— Bitcoinist.com (@bitcoinist) September 7, 2021

 

Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Best Owie

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Best Owie is a Managing Editor at Bitcoinist with extensive experience and a proficient expert known for crafting captivating and insightful content. Best boasts over six years in the crypto sector, and has supervised the conception and publication of thousands of articles. Best is also a content and marketing strategist with the ability to make sure your content reaches the right audience and beyond. In every aspect, Best stands out as a consummate professional, always striving for unparalleled excellence both within and outside the workplace.

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