El Salvador has recorded a notable drop in remittances posted in Bitcoin and other cryptocurrencies in H1 2023.
Recent data from Banco Central de Reserva (BCR), El Salvador’s central bank, indicates the country’s crypto remittance program saw a 26.5% drop in usage, even as remittances grew by more than 5%.
A snippet of the data shared by journalist and university professor Edwin Segura on July 22 via Twitter shows that Salvadorans living abroad sent back nearly $4 billion into the country in the first half of 2023.
In what many may see as an indictment of Salvadoran President Nayib Bukele’s law that made bitcoin a legal tender in the Central American nation, only $46.7 million was remitted via Bitcoin and other cryptocurrencies.
Traditional banking institutions processed about $1.45 billion, while dedicated remittance platforms such as Wise and Remitly handled the bulk of the money, with about $2.4 billion going through the platforms.
According to the data, remittances to El Salvador grew by 5.2% compared to the same time in 2022. However, the use of BTC to send funds has dropped drastically, with the latest figures being $16.8 million less than in 2022.
In contrast, banks and fiat payment platforms recorded upticks in their use for remittance. Banks saw a 12.1% jump in the amount of funds sent through them, while remittance companies recorded a modest 2.3% increase.
Is El Salvador’s Bitcoin project facing headwinds?
El Salvador president Nayib Bukele previously highlighted that his people were paying a hefty $400 million annually in remittance fees.
By adopting Bitcoin as a means of remittance, the government sought to offer substantial savings to its citizens, in addition to the benefits of a cashless and safer payment system.
Remittances are a crucial component of El Salvador’s economy, contributing $7.5 billion in 2021. It’s projected to reach $7.8 billion this year, amounting to about 27% of the country’s GDP, according to World Bank figures.
The setback with Bitcoin remittances has raised concerns as the country invested heavily in its bitcoin project, including approximately $107 million to purchase 2,381 BTC for the national treasury.
Unfortunately, due to market fluctuations, the country faced paper losses of over $60 million on its investment.
The impact of these struggles is evident as a 2022 survey revealed that two-thirds of the country considers the Bitcoin program a failure, and three-quarters of the population have never used cryptocurrency.