El Salvador Adopts Bitcoin as Legal Tender, Remittance Companies Face Sudden Blow

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] CNBC reported on the 9th (local time) that remittance service companies have suffered huge losses as El Salvador adopted Bitcoin as legal tender.

According to the report, the amount of remittances sent by migrants from El Salvador to their home country reached $6 billion (approximately 7.0365 trillion KRW) last year alone.

This accounts for 23% of El Salvador's Gross Domestic Product (GDP).

Seventy percent of El Salvador's population receives remittances, with an average monthly amount of $195.

However, with the El Salvador government adopting Bitcoin as legal currency and launching the Bitcoin electronic wallet "Chivo," which charges no remittance fees, remittance service companies such as Western Union and MoneyGram are inevitably facing setbacks.

Until now, about 60% of El Salvador's overseas remittances were sent through these remittance service companies, and about 38% were conducted through banks.

Regarding this, El Salvador President Nayib Bukele estimated that if Bitcoin usage becomes widespread, remittance companies could lose $400 million (approximately 469.08 billion KRW) annually, CNBC reported.

However, Mario Gomez Lozada, who has worked at Merrill Lynch and Credit Suisse and currently operates a cryptocurrency derivatives exchange, estimated that the losses could approach $1 billion.