The Central American state of El Salvador was the first country to adopt bitcoin as its official currency in September 2021. The reform, in particular, was aimed at improving access to the banking and financial system and facilitating the transfer of funds. Stranger, new, unfamiliar before and after. Taking such experience, a university study, in practice, shows that bitcoin is rarely used by the people of Salvador today.
El Salvador is the first country to accept bitcoin as its official currency
Under the law of September 7, 2021, known as the “Bitcoin Law”, El Salvador became the first country in the world to adopt crypto-assets as its official currency. Since then, Bitcoin is the legal tender in El Salvador, I.e. all payments can be made directly in Bitcoin, so all merchants must accept payment through this crypto-asset. For example, it is possible for a Salvador resident to pay his taxes in bitcoin.
El Salvador is a Central American country with a population of 6.3 million. It ranks 124thAnd Ranking by Human Development Index (HDI), Behind Morocco, Guyana and Iraq.
The expected benefits of such reform, particularly those promoted by El Salvador’s President Naib Bekule, are many:
- First, let it go Reduce dependence on the US dollarThe country’s official currency since the Salvadoran colonization in 2001, hence the Federal Reserve-led monetary policy (EDF).
- Later, this monetary reform had to be done Improving access to the banking and financial system of the Salvadorian peopleNot yet in the bank.
- Finally, the adoption of Bitcoin as the official currency facilitates the transfer of funds, especially from Salvadorans living abroad.
Early lessons from the experience of bitcoin in El Salvador
A Recent study Written by F. Alvarez, D. Argente and D. Van Pattan, three researchers from American universities make a drawing possible. First rating Adoption of Bitcoin in El Salvador. This study a Extensive study Conducted directly with Salvador families and entrepreneurs. The observation is clear: incentives implemented by the El Salvador government, despite being accepted as the official currency Bitcoin is rarely used as a means of payment.
The government has developed an app to encourage the Salvadorian people to accept bitcoin as a means of payment – Sino wallet – Allows you to exchange Bitcoins and dollars for free and offers $ 30 in Bitcoin – Equivalent to 0.7% of GDP per capita – This is for any new user.
First, two-thirds of those questioned said they were familiar with the application Sino wallet. Despite the encouragement from the government, 21% of them decided not to download it. They said they wanted to make a cash payment and / or did not have enough confidence in the application or Bitcoin in general. Therefore, almost half of the population of Salvador, according to this estimate, could not or did not download the application to convert bitcoins to dollars. (And vice versa). In addition, of the Salvador people who downloaded the application, only 40% continued to use it after spending $ 30 on government-issued bitcoins. However, this application is not serious. : The average user of the application does not pay or receive Bitcoin in a given month.
Also, despite the September 2021 law, Only 20% of surveyed businesses said they accepted bitcoin payments And only 11% said they received money in bitcoin. Overall, the authors of this study estimate that about 5% of sales are settled in El Salvador by bitcoins. Another sign of crypto-asset distrust: 88% of companies that receive bitcoins claim to immediately convert them into dollars.
Finally, contrary to the expectations raised by the September 2021 monetary reform, Bitcoin is no longer used for money transfer by the people of Salvador today. According to the Central Bank of El Salvador, only 1.6% of Salvadoran remittances from abroad were made in February 2022 in Bitcoin.
Sending personal remittances from abroad is the main source of income for most Salvador people. Overall, the World Bank estimates that these transfers will account for nearly 24% of GDP by 2020.
The adoption of bitcoin as the official currency in El Salvador is far from having the expected effect.
Beatrice Ashford is a contributor at Nintendo-power.com, covering a wide range of topics including news, politics, business, technology, sport, entertainment, and lifestyle. She focuses on delivering clear, balanced reporting and useful information that helps readers stay informed about current events and emerging developments. Her work highlights stories that matter to everyday audiences, with an emphasis on accuracy, relevance, and accessible journalism that keeps readers connected to the issues shaping the world around them.