Despite recent legislation in El Salvador mandating the use of bitcoin as legal tender, local money transfer companies are said to be reluctant to accept BTC.
Kenneth Sukhuki, an independent research fintech analyst, told Reuters that money transfer companies are unlikely to start subsidizing bitcoin and other cryptocurrencies before they are required to do so in line with customer needs, and will likely create a stalemate in domestic payment industry.
“For Western Union and some other remittance providers, keep in mind that most remittances go from developed to emerging markets primarily to the people — families and friends — who handle the money,” he said.
Suhoska estimates that less than 1% of global cross-border remittances are transferred using cryptocurrencies, adding:
“Since Bitcoin is not widely adopted or accepted, these translation providers will remain relevant for years to come.”
Global payments firm MoneyGram International also highlighted the challenge of navigating the underdeveloped infrastructure that allows for the transition between cryptocurrencies and local fiat currencies in emerging economies.
“We have built a bridge to link bitcoin and other digital currencies with local fiat currencies,” a MoneyGram spokesperson told Reuters, adding:
“As cryptocurrencies and digital currencies become more prominent, there is a major barrier to further growth/migration to local fiat currencies.”
Last month, MoneyGram announced a partnership with Coinme to allow users to buy and sell cryptocurrency with US dollars at 12,000 merchants across the United States.
Related: El Salvador’s Bitcoin Adoption Could Threaten IMF Negotiations: JPMorgan
Suhoski also highlighted the compliance burden with crypto support for payment companies, noting that Western Union’s annual compliance costs have nearly doubled from around $100 million to $200 million over the past decade.