Unfortunately, but somewhat predictably, the press has fallen for Bukele’s bunkum hook, line, and sinker. It reports on cherry-picked instances of high remittance fees and claims that the Bitcoin Law will cost traditional money-transfer companies such as Western Union millions in lost business. But remember my 95 percent rule: 95 percent of what you read in the financial press is either wrong or irrelevant. Indeed, it’s time to stop listening to Bukele and to start following the data.
Traditionally, remittances are sent and received via money-transfer services provided by private companies. According to the World Bank, in the first quarter of 2021, these companies (Western Union, MoneyGram, Ria, and Remitly) charged between 0 to 4 percent in fees for a $200 remittance, depending on the transfer method. El Salvador has the sixth-lowest remittance costs of the 104 countries monitored by the World Bank, and the lowest of any country in the Latin American‐Caribbean region, with the average transaction fee for sending a remittance at 2.85 percent.
What about Bitcoin remittances? Well, for one thing, most Salvadorans are not interested in Bitcoin. They don’t want to use it. They prefer the U.S. dollar, which has been El Salvador’s legal tender since 2001, when El Salvador mothballed the colón and put it in a museum. Indeed, according to a recent survey by the Central American University, nine out of ten Salvadorans have little or no knowledge of what Bitcoin is. Moreover, eight out of ten Salvadorans have little or no trust in Bitcoin. In El Salvador, Bitcoin is for the birds. These same sentiments are held by the senders of remittances to the motherland, Salvadoran ex-pats. They are being paid in U.S. dollars, not Bitcoin. For Salvadorans, the greenback is king.