Low-cost remittances were one of the key selling points Salvadoran President Nayib Bukele cited when announcing the law that made bitcoin a legal tender in the Central American nation a year ago.
By using bitcoin transfers through the national Chivo digital wallet, Bukele said that the country could save a fortune annually.
“Our people pay $400 million a year in fees for remittances,” Bukele said when the project launched last October, according to Be In Crypto. “That saving alone will be a huge benefit for our people — or at least for those who want it. There is also the advantage of not having to carry cash. Safer and more practical.”
But Bitcoin remittances never took off, accounting for well under 2% of the total amount received.
They dropped even further in the third quarter of 2022, falling 6% to $32 million from $34.22 million in the second quarter, it added.
Remittances are a vital part of El Salvador’s economy, contributing $7.5 billion in 2021, according to Inter-American Dialogue, an NGO, which cited World Bank figures. That number is estimated to climb to $7.8 billion this year and to account for 27% of GDP.
By the Central Reserve Bank of El Salvador’s figure, 94% of that came from the United States, it added.
That’s a problem given that the country has also spent an estimated $350 million on its bitcoin project between spending an estimated $107 million to buy 2,381 BTC for the national treasury — the country’s paper losses are more than $60 million — as well as the cost of giving every citizen $30 in bitcoin to spur them to download a Chivo wallet, and other expenses related to starting and running the program.
It has also led the International Monetary Fund (IMF) to stop discussing a $1.3 billion loan it needs for a Eurobond coming due at the beginning of 2023. That in turn caused the country’s bond rating to be slashed repeatedly, far into junk territory, as ratings agencies saw the likelihood of default growing.
The strain is showing. While Bukele is hugely popular, with an approval rating that’s remained in the high 80% range, his bitcoin program is reviled, with a recent survey showing two-thirds of the country considers it a failure and three-quarters have never used the cryptocurrency.
Another Symbol Falls
While the overwhelming majority of Bitcoin ATMs are in the United States, El Salvador was the No. 3 country in the world in terms of crypto ATMs, behind Canada. But it has been knocked into fourth place, according to Coin ATM Radar.
That does matter, even though the rankings themselves are virtually meaningless: virtaTher U.S has nearly 34,000 Bitcoin ATMs, the site says. That’s followed by Canada at 2,566, and now Spain with 215, having pushed past El Salvador’s 212.
So what? Well, those ATMs were a symbol of the Bukele Administration’s Bitcoin currency project, intended to be a way for users to send and receive cryptocurrency with a digital wallet.
Yet in August, the government had to deny reports that they were being removed due to non-use, saying they were simply being moved by San Salvador’s municipal government.
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