El Salvador made history by becoming the first country to make bitcoin legal tender, meaning that businesses are required to accept it as a medium of exchange. The government even launched an app called “Chivo Wallet” that allows users to digitally trade both bitcoins and US dollars without paying transaction fees. However, a recent study found that despite these efforts, bitcoin and Chivo Wallet were not widely adopted as a means of payment in El Salvador.
The study, which involved a nationally representative survey of 1800 households and an analysis of blockchain data, found that privacy and transparency concerns were key barriers to adoption. Additionally, the technology involved a large initial adoption cost and faced resistance from firms in terms of its adoption.
Interestingly, the study also found that it was the already wealthy and banked who were using crypto, rather than the poor and unbanked as some had hypothesized.
These findings have important implications for the viability of cryptocurrencies as means of payments and the scope of central bank digital currencies (CBDCs) in developing countries. Despite the lack of adoption in El Salvador, the study provides valuable insights for countries considering the use of digital currencies.
