Remittance firms operating in El Salvador appear reluctant to support Bitcoin despite the country’s new law mandating the crypto asset as legal tender.
Despite El Salvador’s recently passed law mandating Bitcoin as legal tender, local remittance firms are reportedly hesitant to adopt Bitcoin (BTC).
Speaking to Reuters, Autonomous Research fintech analyst Kenneth Suchoski argued that remittance firms are unlikely to launch support for Bitcoin and other crypto assets until prompted to do so by customer demand, likely creating a stalemate for the local payments industry.
“For Western Union and some of the other remittance providers, keep in mind that most of the volume in the remittance industry is going from developed markets to emerging markets primarily to people — families and friends — that operate in cash,” he said.
Suchoski estimates that less than 1% of global cross-border remittances are conducted using crypto assets, adding:
“To the extent that bitcoin isn’t adopted and there’s not widespread acceptance, these remittance providers are still going to be relevant for the years to come.”
Global payments firm MoneyGram International also emphasized the challenge of navigating undeveloped infrastructure enabling ramps between crypto assets and local fiat currencies in emerging economies.
“We’ve built a bridge to connect bitcoin and other digital currencies to local fiat currency,” a MoneyGram representative told Reuters, adding:
“As crypto and digital currencies rise in prominence, a core barrier to further growth is the on/off ramps to local fiat currencies.”
Last month, MoneyGram revealed a partnership with Coinme to enable users to buy and sell crypto assets using U.S. dollars at 12,000 retail locations across the United States.
Related: El Salvador’s Bitcoin adoption may jeopardize IMF negotiations: JPMorgan
Suchoski also emphasized the compliance burden of supporting crypto assets for payments firms, noting that Western Union’s annual compliance costs had nearly doubled from around $100 million to $200 million over roughly the past decade.
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