El Salvador is the smallest country and one of the most densely populated in Central America, with an estimated population of 6.6 million in 2023. The country has a mixed economy, but struggles with poverty and income inequality. Despite these challenges, El Salvador has been making headlines recently, with its adoption of Bitcoin as a legal tender. This move has been controversial, but aims to address the country's reliance on remittance payments and improve financial access for its citizens. The experiment has faced setbacks, but could pave the way for other unbanked or underbanked countries to explore the use of Bitcoin for financial inclusion.
The unbanked population
According to the World Bank’s latest report almost one fourth of the global population is unbanked. The majority of unbanked individuals state that their income is simply too low to open a bank account, others don’t believe that they need an account, while some do not have proper documentation to open one. Other major factors to consider include the cost of opening and managing a bank account and the distance to the nearest bank. More information on the topic is available in the FDIC report.
El Salvador is high up on the list of unbanked countries with almost 70% of its population not having a bank account and only 18% having a debit or credit card. Their nation highly relies on remittance which reaches more than 21% of their gross domestic product. Currently, there are more than 1.5 million Salvadorans settled abroad helping their families by sending money back to El Salvador. Organizations offering those international transfers can charge 10% or more in fees and the transfers can often take days to arrive and sometimes require a physical pick-up.
Bitcoin in El Salvador
In September 2021, El Salvador became the first country to make Bitcoin a legal tender, requiring all businesses to accept it. The country introduced the Chivo Wallet and multiple incentives to get people to use it. All that residents needed was a mobile phone with internet access. To make Bitcoin payments even more appealing, Chivo transactions, conversions from Bitcoin to dollars, and withdrawals at Chivo ATMs were free of charge.
However, the adoption of Bitcoin is still not at the level they want it to be. To increase adoption among Salvadorans, the people need to be educated about the new technology and its benefits, i.e. self-custody, cross-border use, devaluation resistance, instant and less expensive remittance and more.
The country is trying its best to integrate or adapt the already existing solutions and practices to seamlessly fit them into everyday Salvadoran life. People do not need to know everything about blockchain to use Bitcoin, they just need to have a good incentive and reason for using it. The government is working proactively and strives to provide clear guidelines about the products and services that are safe to use. They are setting up new reliable partnerships, building new technology and including the traditional financial industry where it makes sense.
Stability is essential
Bitcoin is volatile and because of this, the majority of merchants do not want to accept it. Not only because they could potentially lose money but also because they need to meet the relevant accounting standards.This problem can be solved with USDT. But until a stable option is on the menu, merchants will always look for a way to “run to safety” as soon as possible.
GoCrypto heading to El Salvador
Our team spent time in El Salvador and researched its market in detail. We used the gathered information to develop a unique business plan that will help the country introduce reliable and regulated payment infrastructure across its cities and speed up Bitcoin adoption.
We believe that the path to mainstream Bitcoin adoption is paved with strong partnerships with reliable and trustworthy players from the payment industry, the blockchain space and governmental institutions. We need to co-design initiatives that will make people’s lives easier, combining multiple solutions into one easy-to-use service. Just like we did in Lugano, Switzerland.
As we see it, Salvadoran merchants and customers would benefit from our range of Bitcoin accepting solutions. Our custom point-of-sale solution would enable merchants to accept Bitcoin payments on the Lightning network and USDT payments on the Polygon network. Customers would be able to pay with any digital wallet that supports these currencies. We would tackle Bitcoin volatility by offering settlement not only in Bitcoin but in Tether and dollars as well. As with all our products, Bitcoin or USDT settlements are always instant and delivered to the merchant’s Manager dashboard account. On the other hand, settlements in dollars need to be sent periodically to a provided bank account. All GoCrypto merchants receive access to our Manager dashboard online tool which offers an overview and control over all the Bitcoin and USDT transactions for accounting purposes.
This would only be the beginning. We would later expand the payment infrastructure and build the foundation for better financial inclusion of all Salvadorans. The first steps have already been made - we have successfully incorporated our company in El Salvador, Elly Financial Technologies SLV, S.A. DE C.V. and are preparing the field to start implementing our business strategy as soon as possible. The case of El Salvador will be a joint effort and we are excited to embark on a new adventure with our partners and the Salvadoran government. The first big moves will be made in Q2 when we will start expanding our infrastructure, connecting all the relevant players, while still being open for new potential partnerships along the way.
Join us on our journey in building a better and more inclusive world.El Salvador, here we come!