Benzinga | Sep 10, 2021 07:36PM EDT

El Salvador's Bitcoin Wallet Could Cost Western Union, Others $400M Annually: Report

Despite some early issues, El Salvador's Bitcoin (CRYPTO: BTC) wallet could take away a large sum of business from global remittance providers.

What Happened: A new report from CNBC said money service providers like The Western Union Company (NSYE: WU) could lose as much as $400 million a year now that El Salvador has officially adopted Bitcoin.

In 2020 alone, El Salvador received $6 billion in remittances, which accounted for more than 20% of its gross domestic product. A sizable portion of this amount also went toward the intermediaries facilitating these transfers.

According to Canadian resident Jaime Garc?a, when sending money home to El Salvador, even a single transfer of $100 comes with a 12.5% payment fee.

Conversely, El Salvador's "Chivo" Bitcoin wallet facilitates international, zero-fee and virtually instantaneous transactions.

"Wherever you are now, you can send bitcoin to anyone with a Chivo wallet in El Salvador, and in minutes, they have the value and then they can go to one of the ATMs and take it out in cash without a fee," said Alex Gladstein, chief strategy officer for the Human Rights Foundation.

"That's drop-dead stunning. It's an incredible humanitarian improvement."

As of this week, El Salvador-based outlets of fast-food giant McDonald's Corp (NYSE:MCD) and global coffeehouse Starbucks Corporation (NASDAQ:SBUX) have already begun accepting Bitcoin as a means of payment.

If El Salvador's population continues to adopt Bitcoin at scale, El Salvador President Nayib Bukele estimates Western Union and MoneyGram could lose $400 million a year in remittances. According to Mario Gomez Lozada, crypto exchange founder and former banker at Merrill Lynch and Credit Suisse, this figure is more likely to be $1 billion.

WU Price Action: Western Union shares were trading at a price of $20.99 Friday, down 1.55%. Bitcoin was trading at a price of $45,087, down by 4% over the last 24 hours.