The acceptance of bitcoin as a form of payment in El Salvador was undoubtedly the most significant event of 2021.
I’m not anti-bitcoin, and I favor bitcoin adoption since it strengthens the bitcoin ecosystem and expands its applications. My doubt stemmed from the El Salvadorian government’s cautious approach to this sensible measure.
Even on the verge of adoption, a wave of outrage swept the country, with individuals forming protest lines against bitcoin. It was right before the adoption, at the end of August:
However, the president stated that everything will be fine, that bitcoin will be voluntary, that people who refuse to accept bitcoin will not face punishment, that the introduction of bitcoin will save money on commissions, and that payments will be quick thanks to LN.
The amount of Chivo wallet downloads has continuously proved the success of Bitcoin on Twitter, according to Nayib Bukele. Was it, however, truly a success? It’s all about the government’s $30 incentive, which was given to anyone who downloaded and installed the Chivo wallet. This was the true reason why people kept downloading the wallet. Just for $30.
Following that, there was talk of launching bitcoin bonds, but the details were repeatedly postponed. The underlying reason behind this was because investors were not interested in bitcoin bonds, according to El Salvador’s former central bank chief: -> LINK.
The country is in a desperate situation. The IMF refused to give a 1.3 billion dollar loan, the country moved closer to default in just seven months, and a billion dollar scheme to issue bitcoin bonds failed to pique investor interest, especially at a time when bitcoin is seen as a dangerous asset.
A report was just released in which a poll of El Salvador inhabitants was done. According to the results of this survey, bitcoin adoption in El Salvador has failed.
Full report here: -> LINK
It accurately portrays the current situation, which is, to put it mildly, awful. Some of the indicators are as follows:
According to this graph, the number of regular Chivo users is far lower than the number of people who learnt about it or attempted to use it, most likely in order to obtain the state’s $30 initiative.
Of course, functions like paying taxes and accepting money transfers through Chivo are unnecessary. These features were almost never used.
The number of wallet downloads was high due to the wave of hype and, of course, the airdrop. Interest in this wallet has consistently waned over time.
Despite considerable government support, after seven months, one out of every three people in the country is unaware of the Chivo wallet.
Businesses in El Salvador are uninterested in bitcoin, despite the fact that there is a state requirement that they do so, and the rate of adoption is barely 20% seven months after the launch:
As I previously stated, many people have downloaded the wallet only for the sake of receiving airdrop money. According to the graph, the majority of users have never added money to their wallet.
What are the results? El Salvador’s attempt to adopt Bitcoin was unsuccessful. What caused this to happen? Of course, it’s not about bitcoin; it’s about the method. Because this is still new territory, and this was the first time that bitcoin was recognized as legal cash by an entire state, I believe the El Salvadorian administration rushed through this legislation. The point is that you can’t make people use bitcoin unless they want to, especially if they’re new to it. People should want to use bitcoin, and the government should build infrastructure around that desire to make using bitcoin more convenient at any level, such as for money transfers, tax payments, and so on.
I believe that this case will serve as a model for other countries that, like El Salvador, have attempted to recognize bitcoin as legal cash. And that everything will have to be thoroughly investigated and studied in order to put this into action. The best approach would be to establish a distinct bitcoin zone in a single city or region and then make a decision on whether or not to introduce bitcoin across the country based on the evidence collected. Research and infrastructure are required, followed by the passage of legislation. El Salvador went in the opposite direction.