In Costa Rica there is a similar thing. They have a mobile payment system called SINPE Móvil, which is only available to those with a local bank account. However, the Bitcoin Jungle wallet allows you to make SINPE payments with sats and the merchant gets colones in their bank account. So a tourist travelling there can pay with sats everywhere that accepts SINPE, without a bank account and without KYC.

I think the ability to spend sats easily is great for adoption, even if it means merchants get fiat, because when it's easy to spend sats, it incentivizes merchants to also accept sats (or at least removes the disincentive not to), which creates a positive feedback loop.