After all the hype about El Salvador making bitcoin legal tender, how many people use the cryptocurrency to make everyday purchases through the country’s Chivo bitcoin wallet? A new study based on interviews with 1,800 Salvadoran households suggests the number is not very high.
“Leveraging this data, we document how, despite the government’s ‘big push’ and a large portion of people downloading Chivo Wallet, bitcoin usage for everyday transactions is low and concentrated among the banked, educated population. , young and masculine,” says a U.S. National Bureau of Economic Research work document released in April.
In September, El Salvador launched Chivo, offering a $30 bitcoin giveaway for each person who signed up. Wallet supports both bitcoin and the country’s existing legal tender, the US dollar. “The main driver of adoption would be the $30 bonus offered by the government,” the authors of the new report found.
But the study also found that many Salvadorans stopped using Chivo after using the free bonus. Only around 20% of survey respondents continued to use Chivo after spending their bonus.
Respondents said 40% of their app downloads occurred when Chivo launched last September, and “virtually no downloads” occurred this year, the authors wrote.
The new study also revealed that bitcoin has been slowly adopted by merchants. Salvadoran businesses are required by law to accept cryptocurrency as a form of payment, provided they have the technical capacity to do so. However, the results of the study suggest that this rule was not very strictly enforced. According to a subset of respondents who owned businesses or could answer questions about payment methods from their employers, only 20% said they accepted bitcoin. The majority of businesses – 88% – said they convert it to dollars instead of keeping a bitcoin balance in the app.
Chivo has had a litany of technical issues since launch. However, technical issues were only sixth on a list of reasons people who knew Chivo didn’t download it (more than 21% of survey respondents). The main reason was a preference for using cash. Some respondents said they didn’t trust the Chivo system and bitcoin, and others said they didn’t have a phone capable of using the app.
Of the survey respondents, 64.6% had access to a smartphone. More than half used only cash to pay before Chivo, 70% did not have a bank account and 90% did not use mobile banking.
“The Salvadoran 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 of paying taxes may not be enough to move to an equilibrium where bitcoin is used as a means of payment exchange,” the study found.
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