Bukele is young, tech savvy, and a budding authoritarian. He has also tethered his political fate to the country’s bitcoin experiment, so he is pulling out all the stops to make it work.
One of those perks is offering $30 worth of free bitcoin to every Salvadoran inside the country who signs up for the Chivo wallet. That’s no small sum in a country where the monthly minimum wage is $365.
Remittances from abroad comprise nearly a quarter of El Salvador’s GDP, and around 70% of the population receives them. The average monthly remittance transfer is $195, and for the households that receive remittances, it makes up 50% of their total income. So the funneling of cash from abroad back home to El Salvador is critical to survival for most of the country.
Around 60% of that cash comes via remittance companies and 38% through banking institutions, according to official data. Fees vary by company, but typically, the smaller the payment, the higher the percentage that goes to fees.
For instance, if García wants to send $10 to his cousin in San Salvador, he will pay $3.24, or a nearly 33% commission to Western Union.
If he uses his Muun self-custodial wallet for the transaction, however, he will pay 10 cents, or a 1% fee. And if García were to pay from a Chivo wallet, which is reserved for Salvadoran nationals living at home or abroad, the transaction would be free. Once his cousin receives the funds, he can then go to any of the 200 new Chivo ATMs the government has rolled out and withdraw U.S. dollars from his virtual wallet.
“Wherever you are now, you can send bitcoin to anyone with a Chivo wallet in El Salvador, and in minutes, they have the value and then they can go to one of the ATMs and take it out in cash without a fee,” said Alex Gladstein, chief strategy officer for the Human Rights Foundation.
“That’s drop-dead stunning. It’s an incredible humanitarian improvement.”
The president estimates that money service providers like Western Union and MoneyGram will lose $400 million a year in commissions for remittances should the population adopt bitcoin at scale. Mario Gomez Loazada, who was born and raised in El Salvador, worked as a banker with Merrill Lynch and Credit Suisse and now runs a derivates exchange for crypto assets, thinks the figure will be closer to $1 billion.
Western Union did not reply to a CNBC request for comment about whether the company was worried about how this might affect business and if there was any plan to alter the fee structure to adjust for increased competition.
This content was originally published here.