Migrant families wary as El Salvador adopts Bitcoin

COLON • Each month, Salvadoran tailor Julio Ramirez receives a small wire transfer from his two daughters in the United States, who have to pay a few dollars in commission fees for the transaction.

As of this week, El Salvador’s government says its historic adoption of Bitcoin as legal tender will save Salvadorans living abroad millions of dollars in transfer charges if they instead use the cryptocurrency to send their money home.

Over 2.5 million Salvadorans live abroad — mostly in the United States — and in 2020 they sent back almost US$6 billion, equivalent to 23 per cent of the country’s gross domestic product.

But Ramirez, who has a small workshop in Colon, a poor municipality 19 kilometres west of the capital, San Salvador, said neither he nor his daughters in California have any intention of using the digital currency. They view it as a liability.

“They say they’re not sending it that way because they think they might lose the money; that it won’t reach me,” the 60-year-old said. “We’re not planning to take the risk at any time.”

From Tuesday, Sept. 7, El Salvador will become the first country in the world to recognize the cryptocurrency as legal tender. President Nayib Bukele has said any Salvadoran can download the government digital wallet “CHIVO” — a local word meaning “good” — to accept payments in Bitcoin or dollars. Having installed the app on their phones, they will be able to withdraw dollars from government-backed cash machines.

Polling suggests that Bukele, 40, is the most popular president in Latin America. But three months after he launched his Bitcoin plan, skepticism about it remains widespread with surveys showing most Salvadorans opposed to its adoption.

Bukele argues the cryptocurrency will make Salvadorans better off and stresses that using it is optional in the impoverished, dollarized Central American country.

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

But Ramirez said that even if his daughters were charged “maybe $10 to $15 for every $100” sent home, Bitcoin’s volatility and the lack of information on the currency meant it was not a viable option. The tailor said he receives about US$150 a month.

Many Salvadorans polled in a recent Central American University study argue it will only benefit the rich, foreign investors, the government, business people 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 planned to use Bitcoin.

“Everything is a risk. If you never take risks, you’ll never move forward,” he said by telephone. “I trust in our president, and if he’s doing it, it’s because he knows what he’s doing.”

The other nine did not see things that way.

Saida Rosales, a 27-yearold homemaker who receives money from her mother in the United States every week, says she is afraid of the rapid fluctuations in the value of Bitcoin, which can vary by thousands of dollars in a single day.

“I’ve heard it’s like a stock price that goes up and down,” she said. “Just imagine, one day my mother makes me a deposit there, and then when she has a look, it’s gone down and it’ll be worth less than what she sent. I don’t think we’ll use it.”

Most of the money sent back to El Salvador in 2020 was from the United States, followed by Canada, Spain and Italy. Of the total sum, 61.4 per cent came through remittance companies and 37.8 per cent through banking institutions, according to official data.

A 2015 Central Bank study showed that over one-fifth of Salvadoran households rely on remittances to get by.