Transfer fees key to adopting Salvadoran bitcoin plan – development bank

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SAN SALVADOR, Aug.24 (Reuters) – Countries in Central America are eagerly awaiting whether El Salvador’s adoption of bitcoin as a parallel legal tender reduces the cost of remittances, a major source of income for millions of people, the region’s development bank said.

President Nayib Bukele’s allies in Congress have already approved legislation giving cryptocurrency official currency status alongside the US dollar, a world first. The move takes effect in September.

Bukele introduced the adoption of bitcoin as a way to facilitate remittances for Salvadorians living abroad.

“Everyone is looking to see if everything is going well for El Salvador and if, for example, the cost of remittances drops significantly … other countries are likely to seek this benefit and adopt it,” Dante Mossi, executive chairman of the Central American Bank for Economic Integration (CABEI), told Reuters.

Mossi called the plan an “extraordinary experiment” to increase financial inclusion in a region where many people do not have access to bank accounts or credit cards and depend on money sent by. parents living in the United States.

CABEI, the regional development bank, is providing technical assistance to El Salvador for cryptocurrency implementation, a major show of support as the World Bank has refused to help, citing environmental drawbacks and transparency. Read more

Mossi said the Central American countries that receive the most remittances are the ones that prioritize the use of bitcoin the most and stressed that CABEI has a “fiduciary duty” to support El Salvador in its demand for bitcoin. ‘aid.

“Guatemala, Honduras and El Salvador are the countries that stand to gain the most if the adoption of bitcoin reduces the cost of remittances,” Mossi said.

CABEI participated in a recent meeting of the Central American Monetary Council, which is part of the Central American Integration System (SICA), where participants asked about El Salvador’s bitcoin plans and discussed expressed interest, he added.

The Central Bank of Honduras referred Reuters to a June 11 statement that the bank does not prohibit, supervise, or guarantee the use of cryptocurrencies as payment methods in the country.

The governments of Guatemala and Honduras did not immediately respond to a request for comment.

According to Autonomous Research, less than 1% of global cross-border remittance volume is currently in crypto, but going forward, crypto is expected to account for a larger share of the more than $ 500 billion in annual global remittances. Read more

Bitcoin offers, in theory, a fast and inexpensive way to send money across borders without resorting to traditional channels.

CABEI chief investment officer Carlos Sanchez said the bank’s technical assistance was aimed at helping El Salvador design a legal framework for the adoption of bitcoin and ensure compliance with strict international money laundering protocols. .

The aid is intended to help El Salvador “navigate waters that have yet to be explored,” Sanchez said.

Reporting by Nelson Renteria and Anthony Esposito; Additional reporting from Orfa Mejia in Tegucigalpa; Editing by Sandra Maler

Our Standards: Thomson Reuters Trust Principles.

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