Small transfers of bitcoin to El Salvador jumped over four-fold in May from a year ago but still represent a small amount when compared to remittances sent in dollars, data shared with Reuters showed.
The Central American country last week became the first country to adopt bitcoin as legal tender, with President Nayib Bukele touting the cryptocurrency's potential as a remittance currency for Salvadorans overseas.Monthly bitcoin transfers of under $1,000 - a proxy for money sent to the country from Salvadorans working abroad - totalled $1.7 million in May compared to $424,000 year earlier, U.S. crypto researcher Chainalysis found.
El Salvador is heavily reliant on remittances. In 2019, transfers using traditional money totalled nearly $6 billion - around a fifth of GDP - one of the highest ratios in the world, according to the World Bank. Chainalysis, which tracks crypto flows for financial firms and U.S. law enforcement, compiles geographical data by analysing web traffic and trading patterns, though the location of transactions can be obscured by virtual private networks.In its latest report, the World Bank found that for the first three months of 2021, remittances to El Salvador jumped a third year-on-year. Some 95% come from Salvadorans working in the United States, it said.
While El Salvador sees bitcoin as a useful way for citizens overseas to send funds home, major remittance firms are cautious about offering cryptocurrency services.Separately, ratings agency Moody's said on Friday that El Salvador's bitcoin law may imperil a deal on a funding programme with the International Monetary Fund .
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