Latin America, Bitcoin, and The Remittance Market. Who is next?

In June of this year, the El Salvador Legislature passed “The Bitcoin Law”.

“The purpose of this law is to regulate bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private natural or legal persons require carrying out.”

Going into effect in September, El Salvador became the first nation to endorse, encourage, and hold bitcoin. The El Salvador Central Bank has yet to release an updated balance sheet to show bitcoin holdings, but according to President Nayib Bukele, the country now holds 700 bitcoin.

With El Salvador being the first country to purchase bitcoin and put it on the central bank’s balance sheet, coupled with massive adoption and technological advancements, it is only a matter of time for other counties in a similar position to El Salvador to do the same.

Why did El Salvador adopt BTC?

1. A substantial amount of an unbanked populous

President Nayib Bukele pointed out that 70% of El Salvadorians do not have a bank account that works in the informal economy.

2. High levels of informal employment

The informal economy includes domestic workers, home-based workers, street vendors, and waste pickers. El Salvador is one of the Latin American countries with the highest levels of informal employment.

3. High remittance to GDP ratio

Along with the size and scale of the unbanked and those in the informal economy, the country also sees personal remittance making up 24% of its GDP. Putting the country at the top of the list for countries in Latin America.

How many countries in Latin America are in a similar position?

Taking the following variables: unbanked populous, informal employment, and a strong remittance to GDP ratio, which countries are closest to El Salvador and, simply by the metrics, would benefit most from adopting a similar position to bitcoin?

According to the data, Haiti, Nicaragua, Honduras, Guatemala, Peru, and Mexico stand the most to gain, especially within remittance markets.

• All of these countries have more than 60% of the population unbanked.
• All of these countries have more than 60% of total employment is informal.
• The average remittance to GDP (nominal) as a percentage is over 13%.

Why does this matter? A tremendous saving in remittance fees.

The key problem that utilizing bitcoin would solve is saving citizens from all the fees traditional providers charge for remittance transfers.

For instance, Haiti has a 23% remittance to GDP rate. If simply 10% of those remittance payments went through bitcoin, there would be $14,430,078 in saved money in the hands of the recipient, not Western Union or PayPal. If 50% of remittances went through bitcoin, that would be $72,150,391 ending up where it should.

We can play this out with the other countries as well.

Nicaragua

• 14.7% remittance to GDP.
• 10% in bitcoin savings: $13,040,583
• 50% in bitcoin savings: $65,202,917

Honduras

• 23.4% remittance to GDP.
• 10% in bitcoin savings: $41,820,359
• 50% in bitcoin savings: $209,101,796

Guatemala

• 14.7% remittance to GDP.
• 10% in bitcoin savings: $83,458,638
• 50% in bitcoin savings: $417,293,191

Peru

• 1.5% remittance to GDP.
• 10% in bitcoin savings: $21,881,028
• 50% in bitcoin savings: $109,405,140

Mexico

• 4% remittance to GDP.
• 10% in bitcoin savings: $310,097,977
• 50% in bitcoin savings: $1,550,489,884

Conclusion

The remittance market is the largest and most tangible global market that bitcoin will dominate first. Bitcoin can cut the reliance on third-party providers for remittance solutions, ultimately leading to more money for the person at the end of that transaction. This is far greater than some “savings” on a financial transaction. The purpose of this transaction is to support one's family and maintain a standard of living. The more money that can be moved with lower costs means more money in the hands of people who need it the most. The system is there, it's getting stronger and being utilized more and more every day. It is only time for the incumbents to fall and truly global digital money to win. The incentives are there, adoption is soon to follow.

Sources not already linked:
https://data.worldbank.org/indicator/BX.TRF.PWKR.DT.GD.ZS?locations=SV&most_recent_value_desc=true
https://www.indexmundi.com/facts/indicators/SL.ISV.IFRM.ZS/rankings/central-america
https://www.statista.com/statistics/1037216/informal-employment-share-latin-america-caribbean-country/
https://www.ilo.org/wcmsp5/groups/public/---americas/---ro-lima/documents/publication/wcms_245889.pdf
https://www.statista.com/statistics/1246963/unbanked-population-in-selected-countries/
https://www.acuant.com/blog/the-worlds-unbanked-population/
https://en.wikipedia.org/wiki/List_of_Latin_American_countries_by_population
https://en.wikipedia.org/wiki/List_of_Latin_American_and_Caribbean_countries_by_GDP_(nominal)