Data shared with Reuters showed that small bitcoin transfers to El Salvador in May increased more than four times from a year ago, but they still accounted for a small percentage of remittances sent in U.S. dollars.
Last week, this Central American country became the first country to adopt Bitcoin as its legal tender, and President Nayib Bukele touted the potential of this cryptocurrency as a remittance currency for Salvadorans overseas. The price of Bitcoin in India is rupee. There were 2.96 million at 2 pm Eastern Standard Time on June 15th.
In May, the total amount of bitcoin transfers of less than US$1,000 (about Rs 73,200) per month was US$1.7 million (about Rs 12 crore), compared with US$424,000 (about Rs 30 crore) in the same period last year. U.S. Crypto Researcher Chainalysis discovered.
Such transfers reached a peak of 2.5 million U.S. dollars (approximately 180 million rupees) in March, but they cannot be compared with the previous year.
El Salvador relies heavily on remittances. According to data from the World Bank, in 2019, the total amount of transfers made in traditional currencies was close to 6 billion U.S. dollars (approximately 439.7 billion rupees)-about one-fifth of GDP-one of the highest rates in the world.
The data shows that the dramatic increase in Bitcoin transfers reflects the trend across Central America, which is one of the first instances of the use of cryptocurrency in El Salvador. However, compared to traditional remittances, its tiny use suggests that cryptocurrency is still a niche tool for Salvadorans.
Chainalysis tracks the encrypted flows of financial companies and US law enforcement agencies, and compiles geographic data by analyzing network traffic and transaction patterns, but the location of transactions may be obscured by a virtual private network.
Data for El Salvador from October to January is not available.
The World Bank found in its latest report that in the first three months of 2021, remittances to El Salvador increased by one-third year-on-year. It said that approximately 95% are from Salvadorans working in the United States.
In theory, Bitcoin provides a fast and cheap way to send money across borders without relying on traditional and often costly remittance channels. However, its relative complexity and lack of infrastructure to convert into dollars are widely believed to hinder its use.
Although El Salvador believes that Bitcoin is a useful way for overseas citizens to send money home, major remittance companies are cautious about providing cryptocurrency services.
In addition, rating agency Moody’s said on Friday that El Salvador’s Bitcoin law may jeopardize its financing plan agreement with the International Monetary Fund (IMF).
Moody’s stated that the move “brought risks to the stability of the financial system and the country’s currency system, and indicated the lack of a coherent economic framework”.
The International Monetary Fund warned on Thursday that it had economic and legal concerns about El Salvador’s laws, which widened the country’s bond spreads.
© Thomson Reuters 2021