El Salvador is struggling to adopt mainstream bitcoin, a survey reveals

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Bitcoin is struggling in El Salvador, the first country to make crypto assets legal tender, according to a new report. According to the National Bureau of Economic Research, a US-based nonprofit research organization, the majority of people in El Salvador have not freely chosen crypto payments, although companies are optimistic that BTC will gain a foothold in the mainstream over time. In September 2021, El Salvador became the first country in the world to allow people to use bitcoin alongside the US dollar for all transactions.

Researchers Fernando E. Alvarez, David Argente, and Diana Van Patten said they personally spoke to 1,800 households in El Salvador about their Bitcoin habits. Their report, titled “Are Cryptocurrencies Currencies? Bitcoin as Legal Tender in El Salvador” claims that “bitcoin usage for everyday transactions is low and concentrated among the bankable, educated, young and male population.”

It adds that only 20 percent of respondents in the Central American country have used the state-sponsored Chivo wallet after downloading it. And among those who use it, just 10 percent spent less cash and 11 percent used fewer debit or credit cards, according to the report.

The report also notes that it “found no evidence of Chivo Wallet being used to pay taxes or send remittances” — a key reason the Bitcoin law was passed in the first place, according to the Salvadorian government.

Residents of El Salvador were encouraged to download Chivo last year and received $30 worth of bitcoin (about Rs. 2,300) as a sign-up reward. The report states that most of those surveyed simply spent Bitcoin and stopped using the wallet.

“We also document that, on average, only 4.9 percent of all sales are paid in bitcoin, and that 88 percent of businesses convert money from bitcoin sales into dollars rather than storing it as bitcoin in Chivo Wallet,” the report adds further highlights that only 20 percent of the companies surveyed stated that they accept Bitcoin as a means of payment.

However, the government is confident that its Bitcoin push will yield positive results when the time comes. Back in November 2021, President Nayib Bukele announced plans to build a “Bitcoin City” funded by selling the bonds, which carry an annual coupon of 6.5 percent. He then mentioned that half of the funds will be used for bitcoin accumulation, while the rest will be earmarked for infrastructure and bitcoin mining using geothermal energy.

Earlier this year, El Salvador decided to relaunch its Chivo crypto wallet to fix a number of issues within the state-run bitcoin wallet, including suspended accounts, unauthorized debits, and failed transactions.

The Chivo wallet has faced technical issues since its launch in September 2021, and the government has confirmed that it has brought in US-based company AlphaPoint to provide better technical infrastructure for the wallet in the future.


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