Bitcoin Still Struggling To Take Off In El Salvador

El Salvador has become a hotbed for bitcoin adoption in recent months. As a result, it may come as a surprise that Bitcoin has failed to gain traction in the country, according to a recent survey. Despite this, several businesses are optimistic that BTC will gain traction in the long run.

El Salvador became the first country in the world to allow people to use Bitcoin alongside the US dollar in all transactions in September 2021. Large-scale protests erupted in response to the decision, which many feared would produce economic instability and inflation in Latin America’s poorest country.

Furthermore, the international world has asked El Salvador’s President to reconsider his decision, notably the United States and the International Monetary Fund.

Bitcoin Hasn’t Gotten The Intended Adoption

According to a recent survey by the National Bureau of Economic Research (NBER), an American non-profit research organization, Bitcoin adoption in El Salvador has floundered. The study revealed that only 20% of respondents in El Salvador continued to use the Chivo wallet after downloading it and spending the initial $30 signup bonus,  The majority of downloads occurred in September, when Bitcoin was first approved for usage in El Salvador alongside the dollar, and almost no one has installed Chivo on their computer since then.

The government’s digital wallet, Chivo Wallet, was launched about the same time as Bitcoin became a legal tender. It also includes a push to teach people how to use it. This smartphone software allows users to convert BTC to dollars and back at no cost, as well as send and receive any money with ease.

The study said:

“The most important reason not to download the app, conditional on knowing about it, is that users prefer to use cash, which was followed by trust issues — respondents did not trust the system or Bitcoin itself,”

Furthermore, 89% of Salvadorans had never received remittances using the app, according to the report (only 3% of respondents used Bitcoin). In addition, according to the report, 99 percent of respondents have never paid taxes with Bitcoin.

In addition, according to El Salvador’s Central Bank, only 1.6% of remittances were sent via digital wallets in 2022.

According to data from 20% of firms, the majority of businesses that accept Bitcoin are large corporations. Bitcoin accounted for about 5% of all transactions, with the majority of them being converted to dollars.

Related article | El Salvador’s Bitcoin Adoption Far Lower Than Expected, Survey Shows – A Blunder For Bukele?

Despite the contentious Bitcoin Law, which stipulates mandatory acceptance, as of April, 80% in El Salvador had yet to accept the benchmark cryptocurrency. To put it another way, only 12% of the businesses who filed a Bitcoin report did so in US dollars (only 71% of them decided to store their coins in the wallet).

BTC/USD slumps as week begins. Source: TradingView

El Salvador’s Bitcoin gamble piqued the interest of the cryptocurrency community and beyond. President Nayib Bukele claimed that Bitcoin payments will save Salvadorans $400 million in remittance costs each year and provide financial services to the 70% of the country’s people who do not have a bank account.

In February 2022, pollsters conducted face-to-face interviews with individuals in 1,800 houses around El Salvador. The survey has a margin of error of 2%.

El Salvador Is Chasing The Dust?

Meanwhile, the International Monetary Fund has urged El Salvador to abolish Bitcoin’s position as a legal tender, following a breakdown in negotiations with the lender over a $1.3 billion loan program.

The purpose of the study was to see if a cryptocurrency could be used as a means of trade. Despite these efforts and the COVID-19 pandemic’s incentive to use contactless payments, Bitcoin is not widely adopted as a method of payment.

The findings highlight the challenges that cryptocurrencies must overcome in order to gain widespread acceptance. The difficulties remain even after a significant government campaign and in favorable conditions. It’s unclear whether BTC will thrive in El Salvador or if it will spread to other countries.

Related article | El Salvador Pegs Bitcoin Sovereign Bond Launch Between March 15-20

Featured image from Getty Images, chart from TradingView.com