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Almost 1/4 of El Salvador GDP is remittances. The point of Bitcoin for them is that there is now a Bitcoin-based money transfer system they can use with no fees

Almost 1/4 of El Salvador GDP is remittances. The point of Bitcoin for them is that there is now a Bitcoin-based money transfer system they can use with no fees. The reduction in fees to the countries citizens should dwarf the country's losses from holding bitcoin. All of which is a minor amount compared to their actual bond repayment amount (which has nothing to do with Bitcoin). A better title might be: the IMF demands El Salvador gets rid of Bitcoin before refinancing its loans. Edit: Adding this addendum to reply to commenters themes. These Bitcoin-based transfers are not on the Bitcoin blockchain but instead actually happening on the Lightning network- the transfer fee is close to zero. In addition to the fees of traditional remittances, there are sometimes additional significant inconveniences- for example some have to travel by bus to the city where the Western Union is located. The current extended Bitcoin drawdown probably doesn't effect things much. Users generally convert their BTC to dollars in the Chivo wallet app the country uses to avoid the volatility. Despite all the theoretical advantage for remittances, adoption for remittances is still very low, with 11% ever using the app for this. It may be in part because using the government app means the remittances are known to the government and can be taxed as income, whereas cash goes unreported. https://www.howtogeek.com/801982/bitcoin-is-legal-tender-in-el-salvador-heres-how-its-going/ https://www.howtogeek.com/801982/bitcoin-is-legal-tender-in-...

el-salvador 4y ago
> Despite all the theoretical advantage for remittances, adoption for remittances is still very low, with 11% ever using the app for this. An issue that Salvadorans in the U.S. face when they want to fund their Chivo Wallets to send to their family is that they charged a Foreign Transaction Fee by their U.S. banks. This happens because the Chivo card transaction is processed in El Salvador and most Salvadorans in the U.S. don't have debit/credit cards that refund Foreign Transaction fees. Depending on the bank they may be about 3% and they add up for larger transactions. Btw Salvadoran banks don't charge foreign transaction for purchases abroad. So these fees are something we rarely think about, and came as a surprise to many :D Or they would have to take a bus or drive to a Salvadoran consulate in the U.S. to use a US Chivo ATM. The time that would take plus transportation costs wouldnt make it a cheap option either. > It may be in part because using the government app means the remittances are known to the government This seems incorrect. El Salvador has very strict transaction reporting laws. 1. Every remittance is reported in El Salvador. Every one of them. In a very detailed way. To at least three government institutions. Central Bank, Financial Investigation Unit and Tax Office. > and can be taxed as income, 2. Transfers between family members are not considered taxable income according to the Tax Code. It's on the first pages of the Income Tax Law: Article 3, Paragraph 3. > whereas cash goes unreported. El Salvador tracks cash transactions. Even paying the $2.29 water bill in coins requires an ID. Other commerces have a higher reporting thresholds, like +$100/$200 in supermarkets and clothing stores. Many cashiers are trained to ask for an ID even for lower purchases to activate product warranty and loyalty programs.
onlyrealcuzzo 4y ago
BTC lost >50% of it's value from it's peak not too long ago. In what world are transaction fees >50%?
- bluescrn 4y ago
  It's fluctuated ridiculously over the last 18 months. But if you bought before about Nov 2020, you've still at least doubled your money.
  - kasey_junk 4y ago
    That’s not helpful for the remittance use case.
    - onlyrealcuzzo 4y ago
      Also EXTEMELY unfavorable when you can be margin called.
    - pessimizer 4y ago
      That's just your privilege talking. If you were a poor El Salvadoran, you'd be thankful to the tech gods to wait a year for your bitcoin purchase to recover its value in order to dodge an $8 Western Union fee (and pay a bitcoin transaction fee.)
endisneigh 4y ago
> The reduction in fees should dwarf The losses from holding bitcoin. The propaganda is strong. How much do you think it costs to send money from say USA to El Salvador?
- el-salvador 4y ago
  > How much do you think it costs to send money from say USA to El Salvador? It depends on the case The cheapest way is depositing a check. Depositing a U.S. check in a Salvadoran bank is free in some banks. The disadvantage is that it is slow
- once_inc 4y ago
  From anecdotes I've seen on multiple places on the internet: between 5-10%
  - littlestymaar 4y ago
    Western union starts at 10% for transactions below $100, but it can be as low as a $8 flat fee for a thousand bucks if you pay cash in store. Bitcoin isn't cheaper than this, because not only there's blockchain fees, but also exchange's, and I'm pretty sure many people use a local broker for managing their bitcoins (at least it's how it works in Lebanon, from what I've read).
    - timbit42 4y ago
      El Salvador is using the Lightning network where fees are much cheaper.
  - prepend 4y ago
    Western Union [0] charges $8 to send $200-600 from the US. So if you’re sending the minimum amount that’s 4%, but that goes down to 1.5% if you send $600. So it’s not very expensive and in many situations the transaction fee is less than Bitcoin. [0] https://www.westernunion.com/us/en/send-money-to-latin-america.html https://www.westernunion.com/us/en/send-money-to-latin-ameri...
JumpCrisscross 4y ago
> point of bitcoin for them is that there is now a bitcoin based money transfer system they can use with no fees There is zero coïncidence in El Salvador and the Central African Republic, nos. 115 and 154 on the corruption perceptions index [1], having implemented Bitcoin as legal tender with zero transparency around the holding wallets. Best case: it isn’t outright embezzlement but facilitating graft. [1] https://en.m.wikipedia.org/wiki/Corruption_Perceptions_Index https://en.m.wikipedia.org/wiki/Corruption_Perceptions_Index

el-salvador 4y ago

> Despite all the theoretical advantage for remittances, adoption for remittances is still very low, with 11% ever using the app for this. An issue that Salvadorans in the U.S. face when they want to fund their Chivo Wallets to send to their family is that they charged a Foreign Transaction Fee by their U.S. banks. This happens because the Chivo card transaction is processed in El Salvador and most Salvadorans in the U.S. don't have debit/credit cards that refund Foreign Transaction fees. Depending on the bank they may be about 3% and they add up for larger transactions. Btw Salvadoran banks don't charge foreign transaction for purchases abroad. So these fees are something we rarely think about, and came as a surprise to many :D Or they would have to take a bus or drive to a Salvadoran consulate in the U.S. to use a US Chivo ATM. The time that would take plus transportation costs wouldnt make it a cheap option either. > It may be in part because using the government app means the remittances are known to the government This seems incorrect. El Salvador has very strict transaction reporting laws. 1. Every remittance is reported in El Salvador. Every one of them. In a very detailed way. To at least three government institutions. Central Bank, Financial Investigation Unit and Tax Office. > and can be taxed as income, 2. Transfers between family members are not considered taxable income according to the Tax Code. It's on the first pages of the Income Tax Law: Article 3, Paragraph 3. > whereas cash goes unreported. El Salvador tracks cash transactions. Even paying the $2.29 water bill in coins requires an ID. Other commerces have a higher reporting thresholds, like +$100/$200 in supermarkets and clothing stores. Many cashiers are trained to ask for an ID even for lower purchases to activate product warranty and loyalty programs.

onlyrealcuzzo 4y ago

BTC lost >50% of it's value from it's peak not too long ago. In what world are transaction fees >50%?

bluescrn 4y ago
It's fluctuated ridiculously over the last 18 months. But if you bought before about Nov 2020, you've still at least doubled your money.
- kasey_junk 4y ago
  That’s not helpful for the remittance use case.
  - onlyrealcuzzo 4y ago
    Also EXTEMELY unfavorable when you can be margin called.
  - pessimizer 4y ago
    That's just your privilege talking. If you were a poor El Salvadoran, you'd be thankful to the tech gods to wait a year for your bitcoin purchase to recover its value in order to dodge an $8 Western Union fee (and pay a bitcoin transaction fee.)

endisneigh 4y ago

> The reduction in fees should dwarf The losses from holding bitcoin. The propaganda is strong. How much do you think it costs to send money from say USA to El Salvador?

el-salvador 4y ago
> How much do you think it costs to send money from say USA to El Salvador? It depends on the case The cheapest way is depositing a check. Depositing a U.S. check in a Salvadoran bank is free in some banks. The disadvantage is that it is slow
once_inc 4y ago
From anecdotes I've seen on multiple places on the internet: between 5-10%
- littlestymaar 4y ago
  Western union starts at 10% for transactions below $100, but it can be as low as a $8 flat fee for a thousand bucks if you pay cash in store. Bitcoin isn't cheaper than this, because not only there's blockchain fees, but also exchange's, and I'm pretty sure many people use a local broker for managing their bitcoins (at least it's how it works in Lebanon, from what I've read).
  - timbit42 4y ago
    El Salvador is using the Lightning network where fees are much cheaper.
- prepend 4y ago
  Western Union [0] charges $8 to send $200-600 from the US. So if you’re sending the minimum amount that’s 4%, but that goes down to 1.5% if you send $600. So it’s not very expensive and in many situations the transaction fee is less than Bitcoin. [0] https://www.westernunion.com/us/en/send-money-to-latin-america.html https://www.westernunion.com/us/en/send-money-to-latin-ameri...

JumpCrisscross 4y ago

> point of bitcoin for them is that there is now a bitcoin based money transfer system they can use with no fees There is zero coïncidence in El Salvador and the Central African Republic, nos. 115 and 154 on the corruption perceptions index [1], having implemented Bitcoin as legal tender with zero transparency around the holding wallets. Best case: it isn’t outright embezzlement but facilitating graft. [1] https://en.m.wikipedia.org/wiki/Corruption_Perceptions_Index https://en.m.wikipedia.org/wiki/Corruption_Perceptions_Index