El Salvador’s Bitcoin adoption may transform remittances in Central America

Reduced remittance costs could prove significant in justifying El Salvador’s adoption of Bitcoin as legal tender.

The Central American Bank for Economic Integration (CABEI) has identified remittances as an important aspect of El Salvador’s Bitcoin (BTC) adoption policy.

According to Reuters on Tuesday, the regional development bank expects other Central American nations to pay close attention to Bitcoin’s impact on remittance costs in El Salvador.

Speaking to Reuters, Dante Mossi, executive president of CABEI, stated that neighboring countries will be incentivized to follow El Salvador’s example if Bitcoin offers significant cost reduction in the remittance market.

The CABEI executive described El Salvador’s Bitcoin adoption policy as an “out of this world experiment” that could foster greater financial inclusion in the country. Thus, the regional bank is helping El Salvador to create a technical framework for Bitcoin adoption.

According to Carlos Sanchez, investment chief at CABEI, the regional bank is keen on helping El Salvador ensure compliance with global money-laundering rules as the country attempts to utilize Bitcoin as a parallel currency. Sanchez described the process as being akin to navigating “yet to be explored” waters.

CABEI’s technical assistance flies in the face of opposition and criticism from the International Monetary Fund. Indeed, the move could be seen as an indication of Bitcoin’s ability to drive significant monetary policy discussions, at least on a national and regional level, even if the global financial establishment remains anti-Bitcoin.

In June, economist Steve Hanke warned that Bitcoin could destroy El Salvador’s economy, while Fitch Ratings has also raised alarms that the country’s Bitcoin Law could pose risks to local insurers.

El Salvador, for its part, appears to be moving forward with its plans to adopt Bitcoin as a fully recognized legal form of money in the country. Earlier in August, President Nayib Bukele announced plans to install 200 ATMs for easy BTC-to-United States dollar conversion.

The country’s central bank has also published draft regulations detailing how banks can deal with Bitcoin.