Bitcoin has not been warmly received in El Salvador, according to a new study released by the National Bureau of Economic Research (NBER). The acceptance of the benchmark cryptocurrency in El Salvador has remained spotty eight months after the country's Bitcoin regulation went into force.
El Salvador's Bitcoin Experiment is 'Crumbling,' according to reports.
El Salvador became the first sovereign state to recognize bitcoin as legal cash in 2021, making it a watershed moment for bitcoin. This brave decision was applauded by the crypto community worldwide, but it was also panned by some.
Domestic residents are similarly uninterested. Despite the fact that the majority of individuals own cellphones with internet access, 60 percent of citizens did not bother to download the state-run Chivo wallet, according to the NBER study.
After spending the $30 airdrop in BTC, more than 60% of responders who downloaded the bug-ridden wallet abandoned it.
President of El Salvador, Nayib Bukele, has previously stated that bitcoin will increase financial inclusion by providing unbanked people with access to financial services and lowering transaction costs for cross-border transfers such as remittances. However, according to the survey, 89 percent of Salvadorans have never received overseas payments using the country's crypto program, and only 3% have received bitcoin payments.
Furthermore, the vast majority of El Salvadorans have never paid taxes in BTC or utilized the Chivo ATMs that have been installed throughout the country. Despite having Chivo on their phones, users continue to utilize cash, debit, and credit cards.
What Went Wrong With El Salvador's Bitcoin Bet
Businesses in El Salvador must accept Bitcoin if they have the necessary technological capabilities, according to the country's Bitcoin Law. However, according to the National Bureau of Economic Research, as of April, 80% of businesses still refused to take BTC. Seventy-one percent of the businesses that did acknowledged to converting bitcoin into US cash right away.
Bukele declared intentions to establish a "Bitcoin City" in the country last November, a tax-free utopia powered by volcanic energy. 20 bills were created earlier this year in preparation for the issuance of $1 billion in bitcoin-backed bonds. The money would be split half and half between bitcoin purchases and electricity and mining infrastructure. However, the small Central American country postponed the issuing of public debt securities in March.
El Salvador's bitcoin bet has been criticized by the IMF, the World Bank, and JPMorgan. They've even requested that the country repeal the statute entirely.
At the Bitcoin 2022 Miami conference, the bitcoin-loving president intimated that he would make a big announcement. However, owing to unforeseen circumstances, he had to cancel his appearance.
While El Salvador's bitcoin experiment appears to be dead for the time being, the government and clever crypto sector executives may be able to turn things around. The BTC project is still in its early stages, but it has the potential to grow into a long-term source of empowerment for the country's poor.