Jaime García really hates using Western Union to send money home to El Salvador.
"In this day and age, it is wild that I had to go to a physical Western Union office, give them actual cash, and then hand them another $25 on top of that, before they would send my money over," García said.
"And then, of course, it takes three days for it to actually arrive in El Salvador."
García, who lives in the Canadian province of Saskatchewan, fled El Salvador when he was 11 after rebels bombed his house. His biggest issue with wiring cash abroad is less the inconvenience on his end and more about what happens to his loved ones receiving the money.
"They have to take a bus to go to a physical location to pick it up, and there are gangs that hang out around those offices. They know what people are going there for, and they basically rob them," said García, who leads a team of researchers at SGI Canada Insurance.
Many in the 2.5 million Salvadoran diaspora send money to friends and family still living in El Salvador. Last year, they collectively transferred nearly $6 billion, or roughly 23% of the country's gross domestic product, and a chunk of that went to the middlemen facilitating these international transfers.
"Remittances are one area where the status quo in our legacy financial system is terrible, with extraordinarily high fees leveled at populations that can ill afford them," said Matt Hougan, chief investment officer of Bitwise Asset Management.
"It's a worn-out Twitter saying, but bitcoin really does fix this," said Hougan.
The hassle around remittances is one chief reason El Salvador President Nayib Bukele cited for declaring bitcoin legal tender. As part of the rollout, the government has launched its own national virtual wallet — called "Chivo," or Salvadoran slang for "cool" — which offers no-fee transactions and allows for quick cross-border payments.
Remittances from abroad comprise nearly a quarter of El Salvador's GDP, and around 70% of the population receives them. The average monthly remittance transfer is $195, and for the households that receive remittances, it makes up 50% of their total income. So the funneling of cash from abroad back home to El Salvador is critical to survival for most of the country.
Around 60% of that cash comes via remittance companies and 38% through banking institutions, according to official data. Fees vary by company, but typically, the smaller the payment, the higher the percentage that goes to fees.
"Wherever you are now, you can send bitcoin to anyone with a Chivo wallet in El Salvador, and in minutes, they have the value and then they can go to one of the ATMs and take it out in cash without a fee," said Alex Gladstein, chief strategy officer for the Human Rights Foundation.
The president estimates that money service providers like Western Union and MoneyGram will lose $400 million a year in commissions for remittances should the population adopt bitcoin at scale. Mario Gomez Lozada, who was born and raised in El Salvador, worked as a banker with Merrill Lynch and Credit Suisse and now runs a derivates exchange for crypto assets, thinks the figure will be closer to $1 billion.
"The whole concept behind bitcoin is the decentralization — the fact that individuals can take control of their financial health and their money."
Western Union (and the like) aren't necessarily banks, per se. But they operate under the same guise: profiting off of people's money. In other words, they're usurers, and thus, essentially parasitic.
If you're an El Salvadorian and you spend half of your monthly income on "remittance fees," why wouldn't you use BTC? As long as government corruption doesn't come into play (and that's a big IF), there's no way that El Salvadorians don't opt for "no monthly fees" over "half your monthly income."
If one of the poorest countries in the world can create a billion dollar in losses to Big Bank, imagine what would happen if a handful of poor countries converted? Or if an economically prosperous nation adopted BTC?
One thing is for sure: if you own stock in WU, you should sell ASAP. That's a sinking ship, unless they can re-brand themselves as they did when the telegram became obsolete.
- WU will never get above $25
- Another nation (likely Latin American) will adopt BTC in 2022
- BTC will hit $100K by the end of 2022
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