El Salvador’s new Bitcoin wallets could cost Western Union $400M a year
cnbc.com
cnbc.com
It’s interesting to see that even their example use case results in the transferred Bitcoin being converted back to dollars right away:
> “Wherever you are now, you can send bitcoin to anyone with a Chivo wallet in El Salvador, and in minutes, they have the value and then they can go to one of the ATMs and take it out in cash without a fee,” said Alex Gladstein, chief strategy officer for the Human Rights Foundation.
I suspect this will be the default behavior for Bitcoin remittances: Buy Bitcoin, send it immediately, then other side sells it as quickly as possible to get back to cash. Bitcoin dropped 20% in the span of minutes on the big launch day in El Salvador. I doubt many people are going to want to hodl their remittances in a highly volatile currency.
It’s also interesting that the costs haven’t actually gone to zero for the Bitcoin model, but they have been obscured and shifted to other parties. This says the receiver can withdraw BTC as cash “without a fee” but what does that mean? Is it like those currency exchange stations at the airport that have “zero fee” but they more than make up for it with unfavorable exchange rates? If not, who is paying to operate and maintain the foreign exchange infrastructure, which isn’t free?
Also, they make use of L2 networks for transfers, but at the end of the day those are still rolled up on to the Bitcoin blockchain, which is unbelievably expensive to run due to the energy requirements that register as a significant fraction of humanities energy usage. That energy must be paid for somehow, which is currently a a mix of block rewards (technically, inflationary money printing) and transaction fees, which are at least amortized across L2 transactions. There may be uses for cryptocurrency yet, but I hope this isn’t the end game because it’s still an inefficient mess. Maybe if we can get away from PoW block chains and also wise up and jettison the arbitrary speculative tokens then maybe we can make some progress.
It definitely makes sense for them to use Tether/USDT for sure, I agree there. But making Bitcoin a legal currency is also a political and economic statement that goes far beyond simply facilitating digital payments.
There's hardly anything truly "bitcoin" about El Salvador's system.
https://www.coindesk.com/business/2021/06/21/strike-is-phasi...
This has been suggested as one of the many reasons Bukele is so keen on Bitcoin/Chivo: he can't print USD, but having control of the national wallet system gives him countless avenues to manipulate the system.
Of course it could also allow the government to do worse things like backdoor wallets and confiscate crypto.
There are lots if wallets not registered with the El Salvador government, and it will be impossible for the government to distinguish those that are genuinely foreign from unregistered wallets used by people ot for purposes nominally subject to El Salvador’s laws.
So, no, it won't make tracking any easier, nor wil it make taxes and tariffs easier to enforce generally.
Something I suspect we often forget about in the world of stable reserve currencies is that the majority of the world can't run floating exchange rates without encountering major volatility. Standard Fiat/Gold backed currencies generally require some large institution to control the currency price either via money supply, foreign currency supply, gold, or government decreed exchange rates. When these institutions fail currencies tend to have rather extreme swings.
I don’t buy it. Those institutional traders have plenty of access in 2021 and it’s still as volatile as ever. The extreme volatility is what makes them their money and also convinces the casual investor to put money into Bitcoin because they think it might 100X again.
If the volatility stops, so does the crypto party. Big traders don’t want it to stop.
Crypto is popular with traders because it's volatile and fragmented.
BTC's price itself has grown much less volatile.
> the volatility spikes in Bitcoin were most extreme in 2011, with subsequent spikes in volatility lessening over time
https://bitcoinist.com/looking-at-bitcoin-volatility-over-th...
Crypto needs a strong financial network of derivative products. There need to be instruments to hedge the price risk for short periods. There's no reason you shouldn't be able to cap movements for a fixed time period, limiting the amount you can lose. So if I want to use it as transfer of fiat, I should be able to do so within a reasonable timeframe.
And as you say, that's the appeal anyway.
"Presumably" is the key word.
There is nobody to verify that the billions in Tether, BUSD and USDC used to buy BTC (and influence the price) are backed by real dollars.
They are not related. Gold, oil and gas are also very volatile and have massive market caps.
This doesn't matter, however. There will be traders who make market that will buy the volatility during the transaction for a fixed fee.
> Also, they make use of L2 networks for transfers, but at the end of the day those are still rolled up on to the Bitcoin blockchain
> which are at least amortized across L2 transactions
That's the point of Layer 2 solutions.
Don't worry, there's a lot of progress being made if you keep up with the industry news.
It’s misdirection, but the costs of maintaining the Bitcoin blockchain haven’t gone anywhere.
Sorry to nitpick your comment specifically, but I always hear this in the crypto community "we're making progress!". But no one ever cares to provide specifics. Why is that?
It's difficult to define what I've learnt, and maybe that's indicative in the opposite way than I'd like.
You have to dip your toe in to check the temperature.
I've known of Bitcoin since it was $1, and was very skeptical of it until I dipped my toe in. Both my feet are wet now though, right up to my knees.
I believe cryptocurrency has a bright future. Bitcoin is the first, Ethereum added something amazing to bitcoin to become a platform for other ecosystems, and now there are smaller competitors that are going to be "the new Ethereum" by being faster and cheaper and more decentralised so the ecosystems can spread wider to cater to more people.
There are a couple of cryptocurrencies that are hoping to be able to soon compete with the transaction speeds and volumes of Visa but with lower fees.
But, admittedly, that kind of performance level is vaporware after 5 years, but work continues and "revelations" always seem to be round the corner:
Cardano smart contracts go live this weekend (I think, unless it's the last testnet release).
Ethereum 2.0 is scheduled for release in December (this will probably make people 'in the know' smirk - so let's say Q1 2022).
Solana is gaining popularity and has the potential for the Visa stats right now, but it's just waiting for the volume to prove it.
Polkadot has its parachain auctions coming up later this month (or next...).
> coming up later this month (or next...).
> scheduled for release in December (this will probably make people 'in the know' smirk - so let's say Q1 2022).
> couple of cryptocurrencies that are hoping to be able to soon compete
Do you see why people roll their eyes when they hear "we're making progress" now?
However:
Ethereum's controversial "London" hard fork went live a couple of weeks ago.
Kusama's parachain auctions have been live and ongoing for a while now.
Bitcoin's Lightning network is powering El Salvador's transactions.
PayPal allows cryptocurrency purchases.
Square is doing whatever it did with crypto.
Amazon and Walmart are hiring digital cash experts.
So it's pretty expensive.
On top of that, the person has to have a bank account that can be connected with PayPal. The benefit of WesternUnion (and why its a lot more expensive) is that you can just show up somewhere, show them an ID and get cash that was transferred to you. Crypto is closer to that, where you can download an app, go to an ATM and exchange for fiat in a short timeframe
The article is about El Salvador's switch to Bitcoin, so the price of smart contracts in Etherium, or some other system, is beside the point.
[0] According to <https://bitcoiner.live/?confidence=0.9> at 6:31 PM CDT.
Its also common knowledge that Western Union and their ilk have been exploiting and sucking dry people who live on the margins of our financial system. Any article that says they're loosing money to a competitor is fine by me.
Even as someone who hates the crypto hype, I have to say this time the crypto-win is legit.
"They have to take a bus to go to a physical location
to pick it up, and there are gangs that hang out
around those offices. They know what people are
going there for, and they basically rob them."
“Remittances are one area where the status quo
in our legacy financial system is terrible"...
... Alex Gladstein, chief strategy officer for the
Human Rights Foundation
“That’s drop-dead stunning. It’s an
incredible humanitarian improvement.”
Lots of derivatives are only available to people on Wall Street or connected to wall street and also are very expensive.
Coinbase providing retail people the ability to lend in scenarios with high yield.
This is where crypto has actual value. Providing better financial services at lower costs.
Coins going up in value just because they are scarce or first movers, is just like Pets.com being valuable because they have a good domain name.
Cash flow and actual value are better investments in the long run over guessing what the next collector's items will be.
How can anything than runs a blockchain offer a service at a lower cost? It can't. The only competitive advantage that crypto has over the financial sector is that crypto is by and large operating with disregard for financial regulations. Let's see how long it's gonna last.
When you don't have to pay a ton of salaries to push paper around, you can make things extremely efficient. And like OP said, a lot of the prices for financial services are artificially high due to lack of competition as it is.
But this is completely independent of any cryptocurrency solutions.
Look at retail stock trading. We now have zero-fee trading, but it’s not because some wonderful blockchain thing happened — new competitors like Robinhood made it the standard across the industry. It wasn’t a technological problem.
Some high-cost services in the USA that seem like technological problems are actually due to insufficient regulation. For example, wire transfers can cost $25 here, whereas they’re free and instant in Europe+UK. This is not because Europe has a magic blockchain — it’s simply the result of EU-level regulation that forced banks to interoperate. (Apparently the Fed is finally doing something similar now, decades late.)
The problems that exist can be solved by markets and regulation. The technology layer of cryptocurrencies is a useless substrate and primarily serves to reenact financial scams from the 20th century.
There is absolutely a place for disruptive technical experiments like cryptocurrency in a small part of the system, and to have good regulation of the rest of the financial system. It seems to me that the current balance is doing exactly that. Why are people dogmatically assured that technical advances in payments can only be driven by governments, when technical advances in virtually every other IT-adjacent industry have not worked like this?
Sure, I agree in principle. But the crypto science experiment is out of hand. It's providing negligible actual value to the system while consuming more energy than a mid-size European nation. This is an egregious failure.
If Bitcoin and Ethereum mining were shut down today, nobody would lose access to any necessary financial service, and we (mankind) would be at least 1% closer to the fossil fuel reduction goals we absolutely must meet. Seems like a no-brainer in the current state of emergency. There are many other things we need to do, but it's distressing that we're not even able to stop this novel waste that didn't exist ten years ago.
What will instead crash first are the newer and less-resilient networks that don't use proof of work: proof-of-authority systems like Cosmos/Polygon, centralized systems like Binance Smart Chain, all the scalable rollup servers. Ongoing transitions like Ethereum's move to proof of stake might also be disrupted. Even if a regulatory approach was ultimately successful in shutting down proof-of-work mining, I think it would take years. Those years could be better spent by devising and encouraging more efficient consensus technologies, like the ones already being launched today.
There needs to be some way for the public at large to show preference for regulatory regimes. Voting isn't as effective as it used to be; which smart contracts I interact with seems like a decent alternative.
The stakeholders who control the blockchain will give themselves every crypto holder's money if their interests are threatened in any way. Has everyone forgotten about the 2016 Ethereum DAO scandal?
If so, I remember it quite vividly - not sure how it supports your claim though. Ethereum classic is still around, and a decent number of purists still use it. I don't share their convictions, but I'm glad they have the option.
— so, didn’t steal the money? Or are you admitting a smart contract isn’t any kind of contract at all?
Glad “the community” stepped up to prevent smart contracts from being credible. Though I’m not sure why this community is a preferable regulator to the ones we have for actual money. Since cryptoinvestments are also bound by real-world law, you now have two regulators: the real one and the “community” that transfers cryptomoney to itself when it wants.
The only party that disagreed was the Eth classic community, and they still have a coin and codebase with contracts credible by your unusually high standards. The only thing they lost was investor sentiment. If those standards prove to be advantageous for a group to operate under, they'll gain ground over time. That's the beauty of crypto - people can decide the protocols and community they prefer in real time, and vote with their money accordingly.
Then they laugh at you...
Seriously, you need to think about this more carefully.
You're basically arguing that everybody should make their own rules, and disregard everybody else's rules, which is kind of antithetical to the whole concept of civilisation...
A regional entity can't really have full control over its monetary system unless it's a 'nobody goes in or out' fortress like North Korea. In which case, it's of course difficult to have a democracy in anything but name! So to talk about the rules of local politics as if they can contain the monetary system through which they trade with others doesn't seem to me like the product of careful thought either. The US was sort of in that position because it was the global hegemon, but that should hardly be thought of as the historical norm.
1 - apply to all market participants 2 - apply to some market participants but not others 3 - have no regulations at all
I say that regulations should apply to conventional finance and crypto, because anything else would be giving an unfair advantage to some market participants, so I'm arguing for 1.
The crypto bros are saying that they don't want financial regulations to apply to them, because they don't want to, but they still want regulations to apply to conventional finance, so they are arguing for 2.
What is your position exactly? Because sometimes it seems that you want 3, but it's hard to tell from your confused rhetoric.
For that matter if self-driving cars became able to respond faster than a human, there'd be no need for the old speed limits at all. A car would probably know its hardware much better than a human and know what it's individual fastest safe speed would be. Universal speed limits would only be necessary while there are human and AI drivers on the same roads. Which is why, as I said, a phased change-over would be best.
This very much remains to be seen. Much of the complexity of finance (and the value being provided) arises from the need to quantify risks of many different kinds.
Not nearly all of that information is available on-chain, and for many scenarios I can't imagine it ever will be.
/s
Cryptocurrency, namely bitcoin, has lasted 13 years and only looks to be getting stronger and more widely adopted.
Bitcoin's theory, based on its white paper, is that Blockchain offers to remove the middleman, or at least decentralise the middleman. Maybe it won't lower the cost, but it will hopefully spread those costs over a larger group of participants.
> Coins going up in value just because they are scarce or first movers, is just like Pets.com being valuable because they have a good domain name.
Isn't scarcity baked in to Bitcoin? Any investments made using it will have to return more than the deflation / speculative-hoarding rate, which means useful things won't get funded.
I just can't see any truth in that statement, but admittedly I'm probably looking at it from a different angle to you.
Cryptocurrency cuts out the middleman in a transaction, or at least minimises the cost and 'touch' of a middleman, and that's where the cheaper-ness comes from - no vampiric-squid-encircling-the-globe sized multi-national taking its monopolistic percentage. That's my angle. The behaviour of said percentage-takers over the last century haven't exactly made regulation the saviour of the common citizenry either.
What do you think about the Gigawatts of energy + transaction fees that are going to miners? Because your hyperbolic statement is what I think of the miners in the cryptocurrency world.
They do nothing but buy up critical parts (GPUs, ASICs, etc. etc.), use up rare resources (energy / coal / etc. etc.) and then are paid to do so (mining rewards, transaction fees), without offering much innovation on their own.
Doubling the number of miners in the world for the BTC network won't improve the speed of the network, nor would it improve the rewards. All it would do, is double the energy usage.
I'm a tree hugging hippie and the energy use of bitcoin bothers me very little, as it's a barely a blip on the radar in comparison to numerous other human activities that have been going on for multiple decades and that no one mentions alongside BITCOIN ENERGY USE!!! for comparison because they're pushing an agenda.
I'm annoyed about the GPU thing, but that's capitalism; that's the market doing it's thing. Not sure how else to argue that point. It's probably also exacerbated by COVID messing up supply chains.
Regulation, compliance and customer support actually cost money, and by cutting most or all of it out, crypto based services are obviously cheaper.
A better criticism of regulation would be that, depending on how it's enforced, it can serve to create regulatory motes for incumbents and hinder mentioned competition.
Crypto doesn't solve this – it just sidesteps the problem, and that isn't feasible in the long term.
Theoretically, I can't argue your points. Practically, however, in the world that produces the news articles I read, the theory remains entirely ... theoretical.
The point of crypto is to sidestep the way finance markets work in practice. Regulatory capture, paid-for ratings, revolving door appointments between finance companies and government, all sidestepped, by design, by bitcoin and various other cryptocurrencies.
But, yes, cryptocurrency is an immature alternative market, so the myriad potential opportunities to deflower its purity are many a long year from being discovered and exploited.
> Regulatory capture, paid-for ratings, revolving door appointments between finance companies and government
This is a very valid concern to have about traditional finance.
I'm just not convinced that the same structures won't emerge in DeFi sooner rather than later, and that in the regulatory vacuum in between a lot of retail investors will be left holding bags.
Uniswap's dropping of a number of coins / tokens fairly recently proved that a decentralised exchange that supposedly had decentralised governance could still be controlled by a central entity.
DeFi is so young, however, that there just hasn't been the time to run through enough scenarios to see how well, or poorly, it works.
It doesn't help that there have been so many rug-pulls and scams because so many people are blinded by dollar signs they can't see an elephant sized flashing neon sign saying "we will steal whatever isn't nailed down". This is what needs regulation, somehow...
Regulating against greed and / or stupidity is one of those eternal problems: If humans could do it, they wouldn't need to.
The conundrum of DeFi is the lack of a centralised entity to either have a trustworthy reputation or take to court. Uniswap being a counter-example.
My approach is to move slowly and diversify to minimise risk.
Re-reading what I just wrote, I think I just repeated your last paragraph in a whole lot more words.
Strange, the vast majority of complementary currencies simply work and have no existential crisis. Nobody dreams of a day when they live up to their full potential. People simply use them. Even stranger, the vast majority of cryptocurrencies are not designed to be complementary currencies and are subsequently never used for that purpose.
Here is an example: https://en.wikipedia.org/wiki/WIR_Bank
It's because regulation says only certain institutions are allowed to perform certain transactions, and have to perform certain checks, etc. I'm not saying there aren't inefficiencies that aren't directly related to regulation, eg. monopolistic behaviours. But that's the side-effect/price you pay for some kind of oversight. There is of course lots of room for improvement in the systems/regulation we have.
When you look at the history of where the regulations came from, it's usually in response to a major crisis. Humans tend to be reactionary, especially the ones in positions of power when they're enacting laws that limit their paymasters.
> The behaviour of said percentage-takers over the last century haven't exactly made regulation the saviour of the common citizenry either.
Look at the most recent major economic crisis of 2008. The main reason it was so devastating was due to rolling back regulation from previous crises, along with "innovative" financial products that regulators had turned a blind eye to. What do you think would have happened to business lending (ie. jobs) and the stock market (ie. people's pensions) if there had been zero regulation and no ability to inject liquidity into the system?
I totally agree.
I am also, however, 100% skeptical as to the motivations of those pushing to regulate cryptocurrency because of the combination of facts that cryptocurrency is a threat to the encumbent financial institutions and the deregulation that caused the GFC was due to the lobbying of said encumbent financial institutions.
Basically, I think the system is corrupt from top to bottom and so their motivations are protection of status quo as opposed to protection of Joe Street-Level.
The total lack of understanding of how cryptocurrencies work, as evidenced by the infrastructure bill, shows they don't care about understanding it, they care about suppressing it. That's the message they're sending.
Yes, it should be regulated, there are too many scams in the space, and that gives the space a bad reputation but, damn, put some research time in before, how does that phrase go...:
Better to remain silent and thought a fool than to speak and remove all doubt.
How are you going to do ANY crypto transaction without a middleman? Will you wait months and burn insane amount of electricity to finally mine the block yourself? Of will you submit your transaction somewhere and pay the fee?
I have free next-day transfers, pay $1,2 for instant transfer up to $1200 - and those are bank transfers, with all the security of it, not some shady apps. This is in highly regulated market. What are commissions on bitcoin transfers again?
Yes, bank transferral of money for basic things can often be free and very fast these days, but it wasn't when bitcoin was created, and cryptocurrency does more than just that nowadays too.
Both areas are constantly evolving, so comparisons are a bit fraught with bias.
It's also taken me far too many years to learn that ridicule and dismissal are not paths towards persuasion. Not that I've permanently learnt that lesson though.
Quite the statement, anything to back it up with?
Is it more efficient that your centralized system can at any moment be seized by the state, and turned over to a bureaucrat to run in the name of nationalization?
Decentralized systems tend to be more efficient in the long term. Centralized systems tend to be more efficient in the short term.
I think this may be true-ish??
A centralized system like Western Union is very efficient, unfortunately the owner of that system keeps the excess efficiency (fees) for themselves..from the perspective of the user it's not efficient.
Decentralized systems are always more efficient.
Suppose you have something a hundred million people want. It's on one server. The server is in Virginia. If a million of the people who want it are in Japan, it has to traverse the ocean a million times. If a million more are in the UK, etc.
Compare this with something like BitTorrent. The million people are in the UK, the first one gets it over the ocean. From then on, people in the UK can get it from other people in the UK. Either because the client chooses peers with lower latency, or because closer networks are just faster and so when you're receiving from 100 peers at once, the closer ones will send faster and the download will finish from them before you've sucked too much data through the thinner pipe across the pond.
Even centralized companies build decentralized systems internally. Because it's the only way to build a reliable system and it's the only thing that scales.
The hardest part about decentralized systems is paying for the initial implementation. Somebody has to write the code. But in a true decentralized system, they can't sit in the center and suck out a percentage, because there is no center.
So that's how the evolution of systems goes. The first system is centralized, because when it's small the disadvantages of centralization are small, and as it grows the creators retain control of it for a while.
Then the disadvantages of large centralized systems start to manifest. Single point of failure, monopoly power, censorship etc. So people start building a decentralized alternative. At first it's terrible, because it's people working on it in their spare time. Eventually it gets better and takes over. And then nobody ever worries about it anymore, because it's there, and it's reliable and efficient and it works, and it just fades into the background because nobody pays attention to things that are working. Like TCP/IP, or Wi-Fi, or the global market for wheat.
This is often more efficient than a CDN because a CDN won't have a box on your LAN even if there are multiple peers there.
And a CDN is only efficient to begin with if there are already multiple peers on the same ISP's network. If you're the only person on the ISP's network who wants some particular content then it has to come over a transit link just for you anyway. If you're not, you can get it from the other close peer(s) in a P2P network and not use the transit link.
https://alchemix.fi lets you get a self-paying loan on your ETH which you can invest in... more ETH
Given how hard it is to really be safe from hack & rug risk in this space I've generally only put large portions of my portfolio into highly trusted projects like AAVE, uni, sushi etc
It does exist, just hasn't reached some corners of the world. Neobanks are a great example. I had great experience with TransferWise (renamed recently to Wise). Transfers, checking accounts, wire transfers are several times less expensive than with traditional banks. Works like a charm.
And competition doesn't exist, because in many parts of the world in order to transfer/manage large sums of money you need to have political influence (read -> bribes) to operate at scale. This is the "hush hush" secret of any money transfer service that operates worldwide, and why you don't see many people try to enter the space.
Source - friend ran a P&L at WU in a high risk area.
> Coins going up in value just because they are scarce or first movers, is just like Pets.com being valuable because they have a good domain name.
Not true. Pets.com goes up in value because it has utility: i.e. tangible business/economic value associated with marketing and driving customers to your business.
But to ask the obvious question: why does El Salvador need Bitcoin to do it? It’s not clear to me that the settlement system laid out in TFA necessitates a cryptocurrency scheme, since it all boils down to a locally denominated network of ATMs. Is there some technical reason for this that I’m missing? Without one, it feels like burning tires to accomplish a financial task that any non-failed state (certainly one that can roll out apps and ATMs) should be able to accomplish with ordinary means.
The banks are literally the problem that Bitcoin solves, not the solution. Banks = fees and censorship.
But yes it is possible, and as easy as entering some different/extra numbers compared to intranational sort code/account number transfers.
Bank-bank requires that the bank at both ends supports sending/receiving to/from (as applicable) IBAN or similar yes. In the UK in practice that means 'mainstream' banks do and 'challenger' banks don't. (Monzo for example prefers to solve the problem by integrating Wise a bit into its own app.)
Wise avoids it by charging you (like paying for any other product/service) or having you transfer to its account in your country, and then sending the payment to the destination bank from its account in the same country as that, so it becomes two local transfers, one in each country.
Wise (and competitors, no affiliation just can't recall other names at the moment) are popular/standard in Europe, but as far as I can tell not so much in North America. I don't know why; as far as I can tell it's supported (certainly the currencies are) and allowed?
Of course if you have cash you want sent it's no good, but I'm not sure how many legitimate use cases there are (where you can't deposit in a bank current account first) for that these days.
...what was the point of providing this answer then when the question was specifically about El Salvador...
If you do actually want to send money to an SVC denominated account in ES, then no, it doesn't help you (beyond 'you could sign up to be notified'...), sorry for bothering you with it?
We don't support SVC in El Salvador either. The USD has been our main currency since 2001.
A search for "Bitcoin price" will show the price in SVC.
This is a tired observation, but I'll trot it out again: I don't care how "secure" my financial settlement layer is if it allows me to flush my net worth down the drain with a single typo. My threat model includes my ability to feed, clothe, and house myself, all of which are contingent on my ability to claw back transactions that are fraudulent or incorrect. Blockchain solutions offer me no relief.
They also believe that world will eventually move onto Bitcoin standard, and being the first adopter is beneficial for them.
https://tradingeconomics.com/country-list/inflation-rate?con...
El Salvador uses the USD, so if the federal reserve bank of the US prints money it devalues their currency as well. Not a good position to be in as a sovereign nation.
1) Be independent of a peg on a currency controlled by another state 2) Attract investment from the wealthy crypto crowd 3) Appeal to younger voters through a visionary approach
We shall see if they succeed. I suspect we are in for a train wreck, but am hoping it works in their favor.
The situation is also getting better based on this report linked in Wikipedia:
Not in El Salvador. A quick Google search shows that:
A mid sized bank supports about 9 remittance companies. And a credit union supporting about 15.
It's less than that.
$ 400 million commissions / $ 24 640 million GDP x 100 = 1.66% of GDP.
I am not familiar with how revenue is shared between the remitting companies, but part of those commissions are set to offset the costs of operating the remittance network in El Salvador. Operating offices, armored trucks, complaiace, bank staff wages and security expenses.
Western Union struggles to maintain a "premium" price now due to competition.
The actual take on an average transaction from USA to El Salvador is way lower because El Salvador uses USD. So the only way to make money is on the Fee. (no foreign exchange revenue)
If you send $50, yes the take is high because there is a bottom to the price. But the average sender sends $200..$300 and cost, as a percentage, drops rapidly with the amount sent.
Many people thought bitcoin would destroy the remittance industry 10 years ago. It did not. People need money they can spend not bits in an exchange. Solve that last mile like Kenya did and maybe...
I don't think bitcoin can handle the transaction volume for the global remittance industry on the person to person scale for "money in minutes" service. It's a better fit for bulk transfers to pay the agents in foreign countries.
These are not wealthy people. The remittance is for real goods. The last mile with money is "can I buy stuff now". Some African countries are moving fast in this area with mobile wallets but it has been slow generally. Maybe this decade...
If you're trying to discuss aspects of the transaction then either you focus specifically on the crypto-to-crypto part of the transaction, or the fiat-to-fiat. The crypto-to-crypto part of the transaction is arguably fast but you are forced to address Bitcoin's volatility, which makes it unsuited as a store of value. The fiat-to-fiat aspect of the transaction on the other hand is arguably slower than simple bank transactions, and often with higher cost.
Every crypto proponent is doing a colossal disservice to crypto by portraying a romanticized and intensely rose-tainted view of crypto. In truth you're just setting up everyone around you to be disappointed. Between magical schemes where crypto transactions are magically instant and cost-free and pretending that crypto is not highly volatile (see the last Bitcoin 50% crash a couple months ago, or yesterday's flash crash) you're unwittingly pulling a bait-and-switch and in the process turning everyone away from it.
The "unlucky" and unusual event in this case is losing money on Bitcoin based on the prior evidence.
Many Canadian companies trade on both. Shopify is another that you may be more familiar with (though I don’t use that one).
You take some volatility risk over those few days, but on average, you save a lot on fees and make a bit of money over those days. Over enough transactions, even the volatility averages out.
When you’re converting 0-$100k at a bank, they charge you 1.5% - 3% (for lower amounts).
Looking at your comment history, it does sound like you registered this user account just to jump on crypto discussions to pump it up.
Even if you're being totally honest with your highly peculiar and definitely uncommon personal anecdote, circumstances do drive down your credibility.
In short, I just really like the coins.
Buying a $5000 car for my parents in particular was a nightmare because they needed the money quickly and the banking options I was looking at were either too slow or had cash limits or had fees. So I just sent it in Bitcoin, they cashed it out the same day on Coinbase and it was smooth and easy.
Receiving money from my friend in Argentina is obviously difficult when they dont have a USD bank account, so we just use crypto.
My brother and I are both crypto enthusiasts and we are comfortable settling our debts in crypto because it's so easy and we both prefer to keep our assets in crypto than USD.
If you think these anecdotes are hard to believe, you need to broaden your horizon in life. I'm not even that weird a person.
Me too! I haven't used crypto for that yet. But for small value transfers <$100, me and my friends have sometimes exchanged Amazon Gift Cards with each other.
Stories about use cases for crypto do sound unusually romantic or risky, but that's probably because sectors underserved by the banking system tend to be viewed as romantic or risky.
This situation exists all the time with all asset classes, not just Bitcoin.
How's transfer "free" if average transaction fee is a few bucks?
https://ycharts.com/indicators/bitcoin_average_transaction_f...
(You don't have to if you use more centralized solutions, which is what most use.)
Lightning channels are addresses owned by multiple parties where you pass around signed transactions that could be settled on chain at any time, but you choose not to because there is no need to.
When you want to settle everything, instead of submitting all the built up transactions, you can just make a single tx instead settling the final balance.
It would be like if you sent me a $5 check every day of the month, and at the end of the month I agreed to tear them all up if you just wrote me a check for $150 instead. The analogy is still poor cause a check can bounce, but theres no good way to cheat in this system.
> go to any of the 200 new Chivo ATMs the government has rolled out and withdraw U.S. dollars from his virtual wallet.
Hmm, sounds like this particular problem isn't exactly solved
The reliance on this "Chivos" platform seems like a big potential issue
International bank transfers between the U.S. and El Salvador arrive on the same day if done before noon.
The local currency is US Dollar and the US is one of the largest trading partners.
So every bank that offers international bank transfers has U.S. correspondent bank accounts with the big banks like Citi, Wells or Bank of NY.
vs in seconds on Lightning Network
Bukele himself is not formally educated beyond high school, and has no background in finance, which would be needed for an initiative as large as this. Additionally, the US State Department has some of his close colleagues on a list of corrupt officials [0].
I wonder what protections are in place that would prevent Bukele from pulling the rug and boarding a private jet with nothing but a seed phrase.
[0]https://www.reuters.com/world/americas/us-names-bukele-aide-...
a) convert to dollars within the app or go withdraw at an ATM. Or
b) buy things directly with btc. There are videos on social media of people there buying coffee, food, etc.
El Salvador already has the dollars by the way. They dollarized ~20 years ago. It’s the only currency in circulation, besides Bitcoin.
Does the state handle the conversion - ie I sell my BTC to the state and it imports the dollars? This is the part I don’t understand is what part brings in new dollars at a lower cost than Western Union.
By the way, when El Salvador imports products from USA it most likely doesn't pay with cash so the net transfer of physical currency might be very close to zero.
How do they do electronic payments? Regular bank wire transfers. The fees are merely unattractive for small amounts. Western Union is a service for the unbanked.
https://www.quora.com/Can-you-transfer-money-from-El-Salvado...
If both ends of the transaction have bank accounts, and the sending end has internet banking (should be pretty universal even for expats in the EU at least, unsure about North America and elsewhere) then using Western Union seems like a complete ripoff.
Remittances, like Western Union, just take a few minutes but have higher fees. Especially for smaller amounts.
International bank transfers cost between USD 11 up to USD 40. Both the sender and receiver pay. They are only worth for larger amounts, for example between El Salvador and the U.S, if the transfers are done before noon and during a working day, they usually arrive on the same day.
Depositing U.S. checks in El Salvador banks is free or cost less than USD 5. This is very slow though, and may up to 30 working days to clear. It may be faster now, but it depends on the bank.
We do have the similarly named SIPA for transfers between the SICA countries (Central America and Dominican Republic) Unfortunately SIPA is not that widespread. It costs about $7.
Personally I'm still not sure that Bitcoins and Western Union should be part of the solution. It seems "simple" for a country to just cap feed and ensure that everyone have access to banks.
In El Salvador simplified bank accounts require no minimum deposit, can send and receive instant bank transfers to other banks, and some allow the account holder to receive a remittance from the US just by typing remittance ID and amount.
No need to go to the bank either. They can be opened from a website or app with a selfie and a picture of both sides of the ID card.
It is also possible to receive a remittance from family using the app by filling a form with two textboxes: 1. MTCN/Remittance code and 2. Remittance amount.
Those who are under 18 cannot access this service though.
The salvadorans living in the U.S., even if they didn't enter the U.S. legally, usually have bank accounts too.
I predict lots of these legacy money transfer services will adapt Jacks model (ie. use Bitcoin network / LN and just worry about controlling the end-points).
This is somewhat analogous to how originally we used PTSN copper-lines to host DSL signals to connect to internet...then eventually we inverted it and artificial "dial-tones" were played over native digital lines.
I've never really thought about it that way, but it does make sense as a standardized transport API first, and everything else second.
Sure, everyone does (things) using Bitcoin. But in order to do those things, they have to speak Bitcoin (simplifying). And once everyone speaks Bitcoin, new products can be created that target Bitcoin, that wouldn't have been feasible if everyone were using 100+ different bespoke systems.
And from its network antecedents in PTSN -> packetized layered transport in data / voice, that seems optimistic about enabling innovation.
Open banking is a much better approach to federated banking.
For a lot of markets, that isn't ever going to fly given regulatory capture.
Consequently, any standard has to also offer a compelling feature over the status quo.
Frankly, it's becoming increasingly depressing have to watch as technology is continually employed to make the world worse, usually for the benefit of making some people rich.
cryptocurrency and bitcoin are not categorically the same.
That's still expensive. Online inter-bank transfers across countries costs me $0 and I don't recall paying my bank for this service, ever.
I’m all for lowering fees and increasing competition, but this article seems to be exaggerating the wire transfer fees while ignoring the costs of the Bitcoin option (exchange rate fees on both ends, etc)
Because El Salvador uses USD, there is no profit opportunity in exchange rate arbitrage.
Because stablecoins are not as decentralized. Why depend on third party if you don't have to?
So instead of controlling their own monetary policy by issuing their own currency, they are now at the mercy of the US federal reserve and a coterie of Chinese cryptomining syndicates.
And you're misinformed about the influence of chinese mining syndicates. Miners have almost no influence on the structure or stability of the currencies they mine.
Also, stablecoins that are pegged algorithmically rather than by 1:1 hard asset backing will eventually lose peg. How long that takes on average depends on the design of the system. Look at Nubits and then look at MakerDAO to see different examples of algorithmically pegged stablecoins.
Person in US deposits money, person in El Salvador withdraws money.
This seems much simpler then making BTC a national currency.
Now think about the fact that 25% of el Salvador's GDP is remittances from the US. Country wide, banks have a shortage of cash deposits every Friday. Bank location a will need to eventually ship that cash to bank location b, and maintain a channel to keep the money flowing.
It's not that simple, if it were that simple that's how banks would do it. There are logistics involved.
About half of the applicants get denied. And the application costs about the half of a monthly minimum wage. Salvadorans who depend on income sent by a US relative would have even less chances to get a visa approval.
At least one of my cards has "non-transferable" text on the back.
There are way better alternatives, including stablecoins which don't have any volatility.
FTFY.