small conversions in Bitcoin From El Salvador more than quadrupled in May compared to the same month last year, but it still represented a small amount compared to remittances sent in dollars, according to data shared with Reuters.
The Central American country last week became the first country to adopt the Bitcoin As legal tender, after President Najib Bukele praised the potential of cryptocurrency as a way for Salvadorans abroad to send remittances.
Monthly transfers for Bitcoin For less than $1,000 — an indicator of money sent into the country by Salvadorans working abroad — it came in at $1.7 million in May, compared with $424,000 a year earlier, according to US research firm Chainalysis.
These transfers reached a maximum of $2.5 million in March, although a comparison with the previous year was not available.
El Salvador relies heavily on remittances. In 2019, traditional remittances totaled nearly $6 billion — about a fifth of the country’s GDP — one of the highest in the world, according to the World Bank.
Rating agency Moody’s said El Salvador’s bitcoin law could jeopardize an agreement on a financing program with the International Monetary Fund (IMF). The measure “carries risks to the financial system and the stability of the monetary system in the country.”
Sharp increase in transfers Bitcoin The data reflects trends across Central America, the data shows, and is one of the first glimpses of cryptocurrency use in El Salvador. However, its insignificant use compared to traditional remittances indicates that digital currency remains a niche tool for Salvadorans.
Chainalysis, which tracks cryptocurrency flows for US financial firms and law enforcement agencies, collects geo-data by analyzing web traffic and trading patterns, even though the location of transactions can be hidden by VPNs.
Data for El Salvador for the period from October to January are not available
Rely on remittances. In its latest report, the World Bank notes that in the first three months of 2021, remittances to El Salvador increased by a third compared to the previous year. He added that about 95% of Salvadorans work in the United States.
The BitcoinIn theory, it provides a quick and cheap way to send money across borders without resorting to traditional remittance channels, which are often expensive. However, their relative complexity and lack of infrastructure to convert them into dollars are seen as hindering their use.
Although El Salvador considers that Bitcoin It is a useful way for citizens abroad to send money back home, and major remittance companies are cautious when it comes to providing cryptocurrency services.
On the other hand, rating agency Moody’s said on Friday that Bitcoin El Salvador may jeopardize an agreement on a financing program with the International Monetary Fund (IMF).
Moody’s said the measure “carries risks to the financial system and the stability of the country’s monetary system and indicates the lack of a coherent economic framework.”
The International Monetary Fund warned Thursday that it has economic and legal concerns about El Salvador’s law, which is expanding bond spreads in the country.