EI Salvador may be promoting bitcoin’s use to help its citizens living abroad send funds back home, but the largest Remittance firms are cautious about offering cryptocurrency services.
EI Salvador needs to receive funds fast. Unlike other nations EI Salvador, the economy heavily depends upon “Remittance,” or funds sent home by citizens working abroad. EI Salvador has just become the first nation to adopt bitcoin formally.
President Nayib Bukele played up bitcoin potential as remittance currency for Salvadorans overseas.
“For western Union and some of the other remittance providers note that most of the volume in the remittance industry is going from developed market to emerging market primarily to the people families and friends that operate in cash,” said Kenneth Suchoski, US fintech and payment analyst at Autonomous Research.
Suchoski Estimated that less than 1% of the volume of cross-border remittance is currently in crypto. This simply means that remittance firms are slow to add bitcoin.
“To the extent that bitcoin isn’t adopted and there’s not widespread acceptance, these remittance providers are still going to be relevant for the years to come,” he added.
Bitcoin offers, in theory, a fast and inexpensive way to send money across borders without relying on traditional remittance channels.
Remittance Firms on Bitcoin
Last month, Moneygram international (MGI.O) said it would allow its customers to buy/sell bitcoin for cash 12,000 U.S. retail location partnership with Coinme.
“We’ve built a bridge to connect bitcoin and other digital currencies to local fiat currency,” MoneyGram said to Reuters. “As crypto and digital currencies rise in prominence, a core barrier to further growth is the on/off ramps to local fiat currencies.”
Western Union (WU.N) largest remittance business had tested the use of bitcoin and cryptocurrencies in the past. It hadn’t come up with a good “use case” that involved significant cost saving, said Suchoski.
In recent years, remittance industry successfully made evolution from transfer via physical retail outlet to online. Cross-border remittance via mobile money increased 65% in 2020 to $12 billion.
Western Union’s annual compliance costs had risen to $200 million from $100 million a decade or so ago, Suchoski emphasized over Bitcoin adding burden.
