Despite being a key selling point for promoting Bitcoin adoption globally, cryptocurrency remittances in El Salvador have not gained significant traction.
In a dollarised economy, traditional remittance services remain the dominant choice for transferring money in the country.
John Paul Koning, a financial analyst, pointed out on social media that the use of cryptocurrency for remittances in El Salvador has declined significantly since Bitcoin was declared legal tender in 2021.
When Bitcoin adoption surged initially, crypto remittances accounted for nearly 5% of all incoming funds to El Salvador in October 2021. However, this share has steadily decreased, falling below 1% by December 2024. This indicates that Bitcoin has not achieved the widespread adoption needed to replace conventional remittance systems.
The Salvadoran government had promoted crypto remittances as a cornerstone of its national Bitcoin initiative. President Nayib Bukele argued that adopting Bitcoin for remittances would save Salvadorans millions in fees typically charged by intermediaries.
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In August 2021, Bukele criticized traditional financial institutions and banks, accusing them of charging up to 25% in fees for remittance services. He claimed the introduction of the government’s Bitcoin wallet, Chivo, would eliminate these fees entirely, stating:
“With Chivo, the commission will be 0%. That’s why they oppose the Bitcoin Law. They’re protecting the $400 million they take from our brothers abroad every year.”
The Chivo wallet was introduced as the government’s official platform, designed for remittances, daily transactions, and peer-to-peer payments. To encourage adoption, the government offered a $30 Bitcoin bonus to users who signed up with verified identities.
However, as part of an agreement with the International Monetary Fund (IMF in 2024, the Salvadoran government agreed to scale back Bitcoin’s role in the economy. This included plans to end or sell off Chivo operations and revoke Bitcoin’s status as legal tender.