Home Latest Remittance firms hesitant to support BTC despite the law in El Salvador

Remittance firms hesitant to support BTC despite the law in El Salvador

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Last week, the President of El Salvador approved a presidential bill that recognizes Bitcoin as a means of payment in the country. However, local companies are in no hurry to switch to BTC transactions. Only a small number of money transfer services in El Salvador have integrated support for Bitcoin. As mandated by the law recognizing digital gold as a legal means of payment.

The restrained reaction of entrepreneurs to the initiatives of the authorities can be associated with the risks of a decrease in fees collected from traditional payments. So says Autonomous Research analyst Kenneth Suchoski.

He also told reporters that the transition to BTC will be possible if the demand for cryptocurrency payments increases. First of all, this applies to financial services operating in El Salvador.

While consumer demand remains extremely low, companies have no desire to rush to the transition to Bitcoin, the researcher emphasized.

He also added: “To the extent that bitcoin is not accepted and widespread, these financial service providers [Western Union and others] will be in demand much more than cryptocurrency”.

According to expert estimates, at the moment, only 1% of transfers in the world carried out in cryptocurrencies. However, he convinced that this figure in the market with a turnover of $ 500 billion will continue to grow annually.

Payment systems note that there is no high demand for crypto transactions

The MoneyGram payment system said that there really is no high demand for crypto transactions yet. This is due not only to insufficient knowledge of people about Bitcoin technology, but also to the underdeveloped infrastructure that increases the availability and speed of transactions with BTC.

The situation is changing, but this process is likely to be lengthy. Large investments will be required to modernize the payment infrastructure.

“We have built a bridge between BTC and local fiat. This is the main barrier to the popularization of cryptocurrencies”, the company said.

According to Suchoski, Western Union’s attempts to expand its range of services with digital assets to date haven’t justified themselves.

Analysts questioned the positive effect of recognizing BTC as a means of payment

El Salvador, which legally recognized BTC as a means of payment, set a precedent for other states. However, experts note that for the country itself, this step can equally entail both an inflow of investments and an outflow of capital. In general, experts agreed that this step will have little impact on El Salvador. Given the size of the country’s economy. JPMorgan analysts also questioned the positive effect on the economy of El Salvador from the recognition of BTC as a means of payment.

Moreover, experts are skeptical about the chance that other states will follow the example of El Salvador.

And the International Monetary Fund said that such a decision would potentially create a number of risks and regulatory problems.

Although El Salvador is not the first country to wish to integrate the main cryptocurrency into its economy.

Recall that in 2017, the Cabinet of Ministers of Japan recognized the cryptocurrency as the equivalent of property value. You could use it to buy goods and services, but it wasn’t legal tender.

In 2018, the German Ministry of Finance recognized Bitcoin as a unit of account. However, since 2020, the authorities have classified digital assets as financial instruments and don’t consider them legal tender.

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