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CABEI Offers Assistance to Support El Salvador’s Bitcoin Adoption

The Central American Bank for Economic Integration (CABEI) head said that the multinational development bank would offer technical assistance to El Salvador to implement Bitcoin as legal tender, Reuters reported Monday.

In a press conference held Monday, Dante Mossi, the executive president of CABEI, said that the development bank would collaborate with El Salvador’s finance ministry and central bank to select a technical team to implement.

El Salvador’s government sought assistance from the institution in implementing Bitcoin cryptocurrency as a legal tender currency in the country. Mossi confirmed this at the press conference.

“We feel very proud that your government’s first choice in soliciting help and support with the implementation is the Central American Bank for Economic Integration,” he delivered the message to El Salvador President and his government.

Mossi further acknowledged that no other nation had adopted Bitcoin as widely as El Salvador has done. He admitted that it is a challenge that must find the best way to protect the public. 

Mossi revealed the bank’s technical advisory group would be formed involving members of CABEI and officials from El Salvador’s central bank and ministry of finance. The bank also intends to help offer project planning and assistance navigating the legal aspects of implementing Bitcoin as El Salvador’s currency.

CABEI was jointly established in 1960 by El Salvador, Nicaragua, Gaugamela, Costa Rica, and Honduras works as a multinational development bank financial institution.

Its non-founding members include Belize, the Dominican Republic, and Panama, while other extra-regional members join, such as South Korea, Argentina, Mexico, and Spain.

Bitcoin Adoption Challenges

Last week, El Salvador became the first nation to adopt Bitcoin as a legal tender after Congress approved President Nayib Bukele’s proposal to embrace the cryptocurrency.

President Bukele submitted the bill to Congress after he announced early this month that El Salvador partnered with digital wallet company Strike to develop the nation’s modern financial infrastructure using Bitcoin technology.

A few days later, the President of El Salvador announced that the country’s state-run geothermal energy utility would start using power generated from volcanoes to operate Bitcoin mining. The announcement was made just hours after the Central American country’s congress voted to make the crypto an acceptable legal tender.

However, the IMF (International Monetary Fund) warned El Salvador about the risks of using cryptocurrency for day-to-day transactions. An IMF team scheduled to meet with El Salvador’s president as the international organisation weighs another relief package for the nation amid its recovery from the coronavirus pandemic.

Meanwhile, President Bukele disclosed that he was in talks with the IMF and stated that he would explain the workings in detail and the status of the economy now that how the currency works a legal tender in the nation.

Central American Countries Eager to See if El Salvador’s Bitcoin Cut Remittance Costs

The Central American Bank for Economic Integration (CABEI) believes that other central American countries could adopt Bitcoin as legal tender to follow El Salvador.

The executives of CABEI recently talked to Reuters. They revealed that Central American countries are eagerly awaiting to see if El Salvador’s bitcoin adoption as a parallel legal tender could cut the cost of remittances.

Dante Mossi, the Executive President of the Central American Bank for Economic Integration (CABEI), talked about the development and stated that neighbouring countries would be motivated to follow El Salvador’s example if Bitcoin provides significant cost reduction in the remittance market.

 “Everyone is watching if it goes well for El Salvador and if, for example, the cost of remittances drops substantially … other countries will probably seek that advantage and adopt it,” Mossi said.

CABEI is an international multilateral development finance institution that aims to strengthen the regional integration of its member countries (Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica, among others) in the global economy.

Mossi termed El Salvador’s Bitcoin adoption plan as an unbelievable experiment that could foster financial inclusion in the country where many people lack access to credit cards or bank accounts and rely on money sent home from relatives living abroad in the United States. 

Central American countries which receive the most remittance are those most likely using Bitcoin and emphasised that CABEI had a “fiduciary obligation” to assist El Salvador in its request for help, Mossi added. For example, El Salvador, Honduras, and Guatemala are the nations that would have the most gain if the Bitcoin adoption lowered the cost of sending remittances.

CABEI is providing El Salvador with technical support on the Bitcoin implementation. Carlos Sanchez, CABEI’s head of investments, also stated that the bank’s technical assistance is focused on assisting El Salvador design a legal framework for Bitcoin adoption and ensuring strict international money laundering standards are adhered to.

“The assistance is aimed at helping El Salvador navigate waters that have not yet been explored,” Sanchez said.

Bitcoin Remittances

In June, President Nayib Bukele pushed El Salvador lawmakers and eventually passed legislation that gave Bitcoin an official currency alongside the US dollar. The law takes effect on September 7.

President Bukele describes Bitcoin adoption as a way to facilitate remittance payments from  Salvadorans living abroad.

A few days ago, Bukele said that Salvadorans abroad would use Bitcoin to send money instantly to family members living in the country. The president stated that Bitcoin adoption would save local citizens $400 million per year in fees for receiving remittances from abroad.

Bitcoin has an attractive use case in the overseas market. By using crypto as a medium to send money overseas, users may avoid some of the high costs charged by money transfer services and traditional banks.

Several people across the globe regularly send money to their family members and friends abroad. Although overseas transfers drop drastically due to the COVID-19 pandemic, remittances to low- and middle-income countries still reach $450 billion annually.

Crypto users say that Bitcoin can facilitate remittances by removing intermediaries and reducing the costs of overseas payments.

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