Migrant families wary as El Salvador becomes first to adopt bitcoin

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COLON, El Salvador, September 6 (Reuters) – Every month Salvadoran tailor Julio Ramirez receives a small bank transfer from his two daughters in the United States, who have to pay a few dollars in commission for the transaction.

As of this week, the Salvadoran government said its historic adoption of bitcoin as legal tender will save Salvadorans living abroad millions of dollars in transfer fees if they instead use cryptocurrency to send their money. at their home.

More than 2.5 million Salvadorans live abroad – mostly in the United States – and in 2020 they returned nearly $ 6 billion, the equivalent of 23% of the country’s gross domestic product.

But Ramirez, who has a small workshop in Colon, a poor town 19 kilometers (12 miles) west of the capital, San Salvador, said neither he nor his daughters in California intended to use digital currency. They see it as a responsibility.

“They say they don’t send it that way because they think they might lose money; that it won’t get to me,” the 60-year-old said. “We do not plan to take the risk at any time.”

Starting Tuesday, September 7, El Salvador will become the first country in the world to recognize cryptocurrency as legal tender. President Nayib Bukele said any Salvadorian can download the government’s digital wallet “CHIVO” – a local word meaning “good” – to accept payments in bitcoin or dollars. After installing the app on their phones, they will be able to withdraw dollars from government-backed ATMs.

Polls suggest Bukele, 40, is Latin America’s most popular president. But three months after launching his bitcoin plan, skepticism about it remains widespread, with surveys showing most Salvadorans are opposed to its adoption.

Bukele argues that the cryptocurrency will improve the situation of Salvadorans and points out that its use is optional in the impoverished and dollarized Central American country.

“Our people pay $ 400 million a year in commissions for remittances,” the president wrote on Twitter in August. “This economy alone will be of huge benefit to our people (or at least to those who want it).”

But Ramirez said that even though his daughters were billed “maybe $ 10 to $ 15 for every $ 100” sent home, bitcoin’s volatility and lack of information about the currency meant it wasn’t a problem. viable option. The tailor said he was getting around $ 150 per month.

Many Salvadorans interviewed in a recent University of Central America study say it will only benefit the rich, foreign investors, government, businessmen and banks.

Reuters spoke to 10 Salvadorans who send or receive remittances, and only one, Los Angeles-based restaurant manager Salvador Amaya, 51, said he plans to use bitcoin.

“Everything is a risk. If you never take risks, you will never move forward,” he said over the phone. “I trust our president, and if he does, it’s because he knows what he’s doing.”

VOLATILITY

The other nine didn’t see it that way.

Saida Rosales, a 27-year-old housewife who receives money from her mother in the US every week, says she is afraid of rapid fluctuations in the value of bitcoin, which can go up to several thousand dollars in a single day .

“I heard it was like a stock price going up and down,” she said. “Imagine, one day my mom deposits me there, and then when she takes a look, it fell and it will be worth less than what she sent. I don’t think we’ll use it.”

Most of the funds returned to El Salvador in 2020 came from the United States, followed by Canada, Spain and Italy. Of the total, 61.4% came from money transfer companies and 37.8% from banking institutions, according to official data.

A 2015 Central Bank study found that more than a fifth of Salvadoran households depend on remittances to get by, and the government is doubling down on bitcoin’s strategy.

Bukele’s administration is installing ATMs for the “CHIVO” digital wallet at various consulates in the United States to promote money transfers through the platform, according to a diplomatic official who requested anonymity.

The Foreign Office did not respond to a request for comment on the plan. A spokesperson for the presidency said the government would provide details in the coming days.

Mario Perez, a 78-year-old street vendor of underwear, said bitcoin’s volatility and the uncertainty over how to use it for transactions was a drag.

“I’m not going to use it,” he said as he went to pick up a dollar bank transfer his sister occasionally sends from the United States. “Neither for remittances nor for work.

Reporting by Nelson Renteria; Editing by Dave Graham; Editing by Dan Grebler

Our Standards: Thomson Reuters Trust Principles.

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