El Salvador’s latest Bitcoin app, the Chivo Wallet, could ensure that money service providers such as Western Union and MoneyGram lose around $400m in remittance commission.
The Republic of El Salvador has made many headlines this week as the country adopted bitcoin as legal tender on Tuesday and became the first-known nation-state to purchase the leading crypto asset.
According to a report by CNBC, these remittance service providers could start losing customers and money.
CNBC’s MacKenzie Sigalos said the loss in remittance commission could be close to $400m a year.
She said, “If you want to send $10 from Canada to El Salvador via Western Union’s app = $3.24 fee; Muun [to] Chivo wallet = $0.10; Chivo [to] Chivo = free. Present Bukkele’s new bitcoin wallet could cost co’s like Western Union $400m/y.”
According to CoinMarketCap, remittances account for a $6bn industry, almost 23 per cent of the country’s GDP. And money service providers like Western Union or MoneyGram are the chosen method of remitting funds to the country
According to official data, about 60 per cent of remittances are through companies and 38 per cent are through banking institutions.
If El Salvador’s population continues to adopt Bitcoin at scale, El Salvador President Nayib Bukele estimates Western Union and MoneyGram could lose $400 million a year in remittances. According to Mario Gomez Lozada, crypto exchange founder and former banker at Merrill Lynch and Credit Suisse, this figure is more likely to be $1 billion.