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Bitcoin is struggling in El Salvador, the first country to make the asset fiat money, according to a new report.
A survey conducted by the National Office of Economic Research concluded that, despite El Salvador’s Bitcoin Law, not many people in the country are using cryptocurrencies.
El Salvador, a dollarizing country, last September legalized Bitcoin. The idea came from the country’s president, Nayib Bukele, an eccentric leader who has been accused by the domestic press and foreign NGOs of being authoritarian.
The act, which requires businesses to accept payments in Bitcoin if they have the technological means to do so, has been criticized by organizations such as the World Bank and the IMF.
Researchers Fernando E. Alvarez, David Argente and Diana Van Patten said they spoke directly to 1,800 households in El Salvador about their Bitcoin usage habits. The report, titled “Cryptocurrency Is Money? Bitcoin as Fiat Currency in El Salvador,” claims that “Bitcoin usage for day-to-day transactions is low and cluster-focused. population is well-off, educated, young and male”.
It adds that 20% of respondents in the tiny Central American country used a state-sponsored Chivo wallet after downloading it. And of those who use it, according to the report, only 10% spend less cash and 11% use debit or credit cards less.
The report also notes that it “found no evidence of Chivo wallets being used to pay taxes or send remittances” – one of the main reasons why the law was passed in the first place, according to the Salvadoran government.
Salvadorans were incentivized to download Chivo last year and were given $30 worth of Bitcoins. The report said that of those surveyed, most spent that amount of Bitcoin and then stopped using the wallet.
It also noted that only 20% of the companies said they accept payments in Bitcoin. Decrypt last year visited El Salvador and noticed that not many businesses — aside from large chains like McDonald’s or Starbucks — accept crypto assets for payment.
Businesses that accept Bitcoin tend to convert it straight to dollars, the report said. “We also recorded that, on average, only 4.9% of total revenue is paid out in bitcoin, and 88% of businesses convert money from selling bitcoin into dollars and do not hold it as bitcoin in Chivo Wallet.” .
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