El Salvador already has 80 Bitcoin service providers legitimately operating under its wing. Further tech innovations are also encouraged by the Central American nation with the elimination of the taxes related to them. Sadly though, the adoption of its citizens remains virtually low.
80 Bitcoin Service Providers Operating Legally
El Salvador continues to be among the global leaders in terms of cryptocurrency adoption, particularly in Bitcoin. This is evidenced by the registration of 80 Bitcoin service providers in the Central Bank of El Salvador. The move highlights the country’s support for the use of Bitcoin and its efforts to allow international companies to assist in this effort.
Among the big crypto-related firms regulated in El Salvador are Chivo, the wallet utilized and endorsed by the government; and various Bitcoin custodians namely Paxos, Bitcapital, 503 Escrow, the startup Niu, and more.
Elimination of Taxes Related to Tech Innovations
To further strengthen its status as a startup-friendly nation, the government has waived all taxes on technology innovations. These include levies on software programming, coding, app development, and AI development.
The decision perfectly coincides with the establishment of the National Bitcoin Office (ONBTC) in El Salvador, which seeks to position the country as a technological and economic powerhouse. The agency is tailored to regulate the industry and to work with Bitcoin entrepreneurs and companies in the implementation of collaborative projects.
Crypto Remittances are Down in 2023
Although El Salvador has been heavily promoting the use of cryptocurrencies, the country saw a decline of 17.8% in Bitcoin and other crypto remittances during the first two months of 2023 as compared to the same period in 2022. The Central Reserve Bank (BCR) of the country has released data indicating that the total amount received in crypto remittances was $15.98 million, which is $3.47 million down in comparison to the same months of last year.
Bitcoin Adoption Rate Still Relatively Low
The latest BCR report indicates that cryptocurrency-based remittances constituted only 1.34% of the total remittances received by El Salvador, which amounted to nearly $1.2 billion. Amid the decrease in cryptocurrency-based remittances for the last two months compared to the same period in 2022, the Salvadoran economy has not been significantly affected by the use of cryptocurrencies for international transactions since the Bitcoin Law was put into effect.
Traditional remittance services are still preferred by most Salvadorans, and the amount of money sent through these services remains largely unchanged. In 2022, El Salvador received over $7 billion in remittances, out of which only $126 million were sent using cryptocurrencies.
Many experts point out the lack of crypto education among the population as the main reason for the low adoption rate. They believe that the Salvadoran government must invest in crypto education to make it easier for its citizens to use cryptocurrencies for remittances.
Additionally, high transaction costs and the volatility of cryptocurrencies are among the main reasons why most Salvadorans still prefer traditional remittance services. In this regard, the government must work to reduce transaction costs and improve the stability of cryptocurrencies to increase adoption.
Final Thoughts
El Salvador’s efforts to promote the adoption of Bitcoin and other cryptocurrencies are commendable, but there is still much work to be done. The country must invest in crypto education and improve the stability and reduce transaction costs of cryptocurrencies to increase adoption. Furthermore, the Salvadoran government must work to address the challenges facing the remittance industry to achieve its goal of promoting more solid financial inclusion and economic growth.