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    Bitcoin does not lower the cost of transferring remittances – El Financiero




    The President of El Salvador, Nayib Bukele, implemented on June 8 the Bitcoin Law that recognizes the cryptocurrency as legal tender. The central argument was to lower the cost of remittances to supposedly “leave in the pockets of migrants and their families billions of dollars that are now paid in commissions.” Far from lowering the cost, using bitcoin can be two or three times more expensive than traditional methods of sending money.

    According to the World Bank, in 2019 personal remittances as a percentage of GDP in El Salvador reached 20.9 percent and in 2020 the amount received was 5.92 billion dollars. One million families depend on remittances. These households received an average of $195 per month and only 13 percent of those payments exceeded $350. As El Salvador was dollarized in 2001, remittances are sent and received in dollars, the dollar is used as the currency. Unlike the case of Mexico, there is no double cost: the commission for the shipment and the exchange rate.

    In 2019, the coastal town of El Zonte (known as bitcoin beach) adopted bitcoin as a regular currency, but it was not popularized because internet access is very irregular due to poor connections, and merchants and consumers have resisted the adoption of the currency.

    El Salvador’s rejection of bitcoin is not limited to bitcoin beach. According to a June 2021 survey by the Chamber of Commerce of El Salvador, 92 percent of more than 600 respondents said they do not agree with demanding acceptance of bitcoin, and 93.5 percent said they did not want to receive their salaries in bitcoin. Salvadorans don’t want to receive bitcoin, they want the greenback.




    The costs of traditional remittances vary depending on what the sender uses as a payment instrument (bank transfer, cash or credit) and how the recipient receives the money (bank transfer, mobile wallet, cash or credit). In fact, your average transaction cost as a percentage of dollar shipping is 2.85 percent per transaction; it is the sixth lowest of the 104 countries monitored by the World Bank. In addition, El Salvador obtained the lowest cost of remittance transfers from any country in the Latin American and Caribbean region.

    As things currently stand, Salvadorans without a bank account (70 percent of the population) can only convert bitcoins to greenbacks at a bitcoin ATM. Currently, El Salvador only has two active bitcoin ATMs located in coastal towns with coverage to a very small proportion of the population. El Sunzal and El Zonte (bitcoin beach)

    To exchange bitcoin for cash (dollars) at a bitcoin ATM, two costs must be paid, a fee for the sale of bitcoin (5 percent) plus a network fee, which consumes the operation as long as the highest possible fee is paid (unpredictable for the consumer). The network rate is the cost of confirming and executing the sale.

    Therefore, the ‘cost of remittances’ when Salvadorans exchange their bitcoins for dollars is at least 5 percent + network fees + travel costs associated with going to an ATM and security costs associated with using an ATM. Bottom line, traditional remittance transfer methods are cheaper than using bitcoin.

    The rush for fintech technologies and the use of cryptocurrencies lose sight not only of costs, but of the social control of coins by consumers. And especially the inequalities of access to computers, internet, costing.

    1 Asociación Mexicana de Uniones de Crédito del Sector Social, A.C. email: [email protected]

    2 https://sites.krieger.jhu.edu/iae/files/2021/06/Bukeles-Bitcoin-Blunder-Final.pdf




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