El Salvador’s Bitcoin remittances are falling again

Low-cost transfers were one of the main selling points cited by Salvadoran President Nayib Bukele when he announced the law making bitcoin legal tender in the Central American nation a year ago.

By using bitcoin transfers through the national Chivo digital wallet, Bukele said the country could save a fortune annually.

“Our people pay $400 million a year in fees for money transfers,” Bukele said when the project was launched last October, according to Be In Crypto. “That savings alone will be a great benefit for our people – or at least for those who want it. There is also the benefit of not having to carry cash. Safer and more convenient.”

But Bitcoin remittances never took off, accounting for well under 2% of the total amount received.

They fell further in the third quarter of 2022, falling 6% to $32 million from $34.22 million in the second quarter, it added.

Money is an important part of El Salvador’s economy, contributing $7.5 billion in 2021, according to the Inter-American Dialogue, an NGO, which cited figures from the World Bank. This figure is projected to rise to $7.8 billion this year, accounting for 27% of GDP.

According to the Central Reserve Bank of El Salvador’s figures, 94% of this came from the United States, it added.

That’s a problem given that the country has also spent an estimated $350 million on its bitcoin project between spending an estimated $107 million to buy 2,381 BTC for the treasury — the country’s paper loss is more than $60 million — as well as the cost of giving each citizen $30 in bitcoin to incentivize them to download a Chivo wallet, and other expenses related to starting and running the program.

It has also led the International Monetary Fund (IMF) to stop discussing a $1.3 billion loan it needs for a Eurobond maturing in early 2023. That in turn led to the country’s bond rating being cut repeatedly, well into in junk territory, as the Rating Agencies saw the likelihood of default increasing.

The load shows. While Bukele is hugely popular, with an approval rating that has remained in the high 80% range, his bitcoin program has been reviled, with a recent survey showing that two-thirds of the country consider it a failure and three-quarters have never used the cryptocurrency.

Another symbol falls

While the overwhelming majority of Bitcoin ATMs are in the United States, El Salvador was the third country in the world in terms of crypto ATMs, behind Canada. But it has been bumped into fourth place, according to Coin ATM Radar.

That matters, even if the rankings themselves are practically meaningless: VirtaTher USA has nearly 34,000 Bitcoin ATMs, the site says. Then Canada follows with 2,566, and now Spain with 215, having pushed past El Salvador’s 212.

So what? Well, these ATMs were symbolic of the Bukele administration’s Bitcoin currency project, meant to be a way for users to send and receive cryptocurrency with a digital wallet.

Still, in August the government had to dismiss reports that they were being removed due to lack of use, saying they were simply being moved by San Salvador’s municipal council.

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