The new bitcoin (BTC) wallet of El Salvador throws the current system around money transfer on the shovel. Financial services firms like Western Union could lose up to $400 million a year as a result.
The majority of the inhabitants of El Salvador depend on money that is transferred from abroad, for example from relatives. Last year, this amounted to $6 billion, which was 23% of El Salvador’s gross domestic product. A large part of this went to intermediaries, such as Western Union. Western Union made the money transfers possible, but charged commissions for this. since bitcoin a legal tender in the Central American country, those third parties are no longer necessary. Because money can now be transferred using bitcoin, Western Union will miss out on all those revenues via commissions. Last year it was about $400 million, or so we knew CNBC to report.
Besides the fact that commissions are involved when transferring money to El Salvador, there were even more disadvantages. For a long time, the only way to physically go to a Western Union office was physical money. Subsequently, it was never entirely certain that the money, in the right amount, would reach the right people in El Salvador. These problems were also seen by President Here’s to watching, which ultimately led to bitcoin now being legal tender in the country. As part of this new legislation, El Salvador has created its own national crypto wallet called Chivo.
From bitcoin Chivo wallet
The Chivo wallet will ensure that transfers go quickly and without extra costs. Also from abroad. Crypto expert Matt Hougan said the following:
“It won’t happen overnight. Not 100% of the transfers will go to the Chivo app tomorrow. These things take time. In addition, people are naturally concerned about trying new things with money. But current money transfer rates will prove unsustainable.”
– Nayib Bukele 🇸🇻 (@nayibbukele) September 8, 2021
Ultimately, the intent is that bitcoin will provide decentralization and thereby return financial control to the residents of El Salvador. The Chivo wallet should help with this.