According to data obtained by Reuters, the amount of Bitcoin transfers to the Central American country of El Salvador in May was more than four times that of the same period a year ago. But despite this, the amount of bitcoin transfers is still small compared to the amount of USD remittances.
The President of El Salvador, Nayib Bukele (Nayib Bukele) once stated that Bitcoin can be used as the legal tender for overseas Salvadorans to remit money domestically. Last week, President Bouquelle’s proposal to use Bitcoin as the country’s legal tender was passed by the El Salvador parliament, and El Salvador became the first country in the world to recognize Bitcoin as legal tender .
Chainalysis, an American cryptocurrency research organization, found that in May this year, the total amount of transfers of overseas Salvadorans to domestic bitcoin was 1.7 million U.S. dollars. These transactions are characterized by a large number of transactions but a small amount of individual transactions, and each amount is insufficient. 1,000. In the same period last year, this figure was only $424,000.
At present, the national economy of El Salvador is heavily dependent on the remittance of overseas Salvadorans to the country. According to research data from the World Bank, in 2019, overseas Salvadorans used traditional funds to transfer funds to El Salvador totaling nearly 6 billion U.S. dollars, accounting for about one-fifth of the country’s GDP, which is one of the highest in the world. One.
The data shows that the rapid growth of Bitcoin transfers reflects the development trend of this digital cryptocurrency in Central America, and also allows the outside world to see the first use of Bitcoin in El Salvador. However, compared with the remittance volume of traditional currencies, the transfer transaction volume of Bitcoin is still very small, which shows that this cryptocurrency is still a small tool used by Salvadorans with caution.
Chainalysis company analyzes network traffic and transaction patterns, and compiles bitcoin transaction data by region. The company provides such services to financial companies and assists the government in its enforcement activities in this area. However, the location of cryptocurrency transactions can be obscured by a virtual private network (VPN).
The World Bank found in its latest research report that in the first three months of 2021, remittances to El Salvador increased by one-third year-on-year. Approximately 95% of these remittances came from Salvadorans working in the United States.
In theory, compared with traditional remittance channels with expensive fees, Bitcoin provides a fast and cheap way of cross-border remittances. However, its relative complexity and lack of infrastructure to convert to U.S. dollars are widely believed to hinder the use and development of Bitcoin.
Although El Salvador believes that Bitcoin is a useful way for overseas citizens to repatriate funds domestically, major remittance companies are still cautious about providing this encrypted digital currency service.
In addition, the rating agency Moody’s said on Friday local time that the legalization of Bitcoin in El Salvador may jeopardize a financing project agreement reached with the International Monetary Fund (IMF).
Moody’s stated that El Salvador’s legalization of Bitcoin “brought risks to the stability of the country’s financial and monetary systems, and lacked a coherent economic framework”.
In addition to Moody’s, the International Monetary Fund also expressed similar views. The International Monetary Fund warned last Thursday that it has economic and legal concerns about El Salvador’s laws.
Reminder : Investment is risky, and you need to be cautious when entering the market. Digital currency investment has greater risks and unpredictability, and this article does not constitute any form of investment encouragement and advice.
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