El Salvador’s Bitcoin Usage Is Low Despite Govt Efforts, Study Finds
A new research study based on interviews with 1,800 Salvadoran households finds that the number of people using Bitcoin (BTC) for every day transactions is not very high.
U.S. National Bureau of Economic Research conducted a study in El Salvador on the potential of a cryptocurrency to become a medium of exchange. They wrote:
“Leveraging this data, we document how, despite the government’s ‘big push’ and a large fraction of people downloading Chivo Wallet, usage of bitcoin for everyday transactions is low and is concentrated among the banked, educated, young, and male population.”
In September, El Salvador became the first nation to make Bitcoin a legal tender in the country. Subsequently the government launched Chivo wallet, giving away $30 in BTC for each person who signed up.
The wallet supports both Bitcoin and the country’s existing legal currency, U.S. dollars. According to the new study, the main driver of adoption is reported to be the $30 bonus offered by the government.
The study also discovered that many Salvadorans stopped using Chivo after they had used the free bonus. Only about 20% of the survey respondents had kept using Chivo.
According to the study, 40% of their app downloads happened when Chivo launched last September, and “virtually no downloads” have taken place this year.
The new study also found that Bitcoin has not widely adopted by merchants. According to the law in El Salvador, companies are required to accept BTC as a form of payment — as long as they have the technical ability to do so. The study found that this rule has not been very strongly enforced. According the respondents who owned businesses or could comment about their employers’ payment methods, only 20% reported accepting BTC. 88% of firms businesses said they convert it into USD instead of keeping a bitcoin balance in the app.
Chivo has faced a number of technical issues since its launch. But, the technical problems were not the main reason why people who knew about Chivo didn’t download it (over 21% of survey respondents). The main reason was simply that the respondents prefer using cash. Some said they didn’t trust the Chivo system and bitcoin, and others said they did not have a phone capable of using the app.
64.6% of the survey respondents had access to a smartphone. More than half used solely cash to pay for things before Chivo, 70% did not have a bank account and 90% were not using mobile banking services.
The authors concluded:
“The Salvadorean experience allows us to document that requiring all businesses to accept bitcoin, providing large incentives to increase its adoption, and accepting it as a means to pay for taxes might not be enough to move to an equilibrium where bitcoin is used as medium of exchange.”
