A recent survey released by the National Bureau of Economic Research (NBER) reported that bitcoin has not been well received in El Salvador. Eight months since El Salvador’s Bitcoin law came into effect, the adoption of the benchmark cryptocurrency remains patchy.
El Salvador’s Wild Bitcoin Experiment Is ‘Crumbling‘
2021 turned out to be historic for bitcoin after El Salvador became the first sovereign state to make bitcoin legal tender. This bold move was commended by the crypto community globally but was also harshly criticized by others.
Domestic residents are also unenthusiastic. According to NBER’s study, 60% of the citizens did not bother to download the state-run Chivo wallet despite the majority of them owning smartphones with internet access. Over 60% of the respondents that downloaded the bug-riddled wallet, ended up abandoning it after spending the $30 airdrop in BTC.
Salvadoran President Nayib Bukele has previously argued that bitcoin will boost financial inclusion by providing unbanked people access to financial services and significantly reducing transaction costs for cross-border payments like remittances. However, the report notes that 89% of Salvadorans have never received international payments using the national crypto app, with only 3% of the respondents having received them in bitcoin.
Moreover, the majority of El Salvador citizens have never paid taxes in BTC nor have they used the Chivo ATMs that have been deployed across the country. Users continue to use cash, debit, and credit cards despite having Chivo on their phones.
How El Salvador’s Gamble On Bitcoin Went Wrong
El Salvador’s Bitcoin Law requires businesses to accept the flagship cryptocurrency if they have the technological means. But the National Bureau of Economic Research indicates that 80% of the companies still don’t accept BTC as of April. 71% of the businesses that did, admitted that they immediately converted the bitcoin into United States dollars.
Last November, Bukele announced plans to build a “Bitcoin City” in the country: a volcanic energy-powered tax-free utopia. Earlier this year, 20 bills were prepared in readiness to issue $1 billion worth of bitcoin-backed bonds. Half of the funds would go toward bitcoin buying, with the rest earmarked for energy and mining infrastructure. But in March, the small Central American nation delayed the issuance of the public debt securities.
The IMF, World Bank, and JPMorgan have repeatedly slammed El Salvador’s bitcoin bet. They have even asked the country to drop the law altogether.
The bitcoin-loving president had teased he would be making a major announcement at the Bitcoin 2022 Miami conference. However, he ended up canceling his appearance due to unforeseeable circumstances.
While El Salvador’s bitcoin experiment looks doomed at present, the government and astute crypto industry leaders could turn it around. The BTC play is in its early days and can still mature into a long-lasting fount of empowerment for the nation’s impoverished citizens.
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