Science Magazine Confirms Almost Zero Adoption of Bitcoin as Currency in El Salvador

The American magazine Science is one of the most prestigious in the world when it comes to scientific dissemination. It is part of the American Association for the Advancement of Science (AAAS). In his most recent articles he tried to answer the question whether cryptocurrencies like Bitcoin could be used as currencies in practice. That is, as a means of exchange for everyday goods and services.

To do this, the researchers focused on the first country to declare Bitcoin legal tender: El Salvador. And the answer is resounding: it is impossible for this asset to be adopted as a currency in this Central American country, despite all the efforts and huge investments by its government to promote it.

Its use is marginal and, currently, corresponds to a small group of tourists who are enthusiastic about this culture or people who have already used cryptocurrencies to invest. The period of greatest use was the first month of the law that turned Bitcoin into legal tender in El Salvador, within the framework of the collection of a $30 bonus with which the Bukele administration intended to encourage its adoption.

To reach these conclusions, the researchers said, they had to turn to alternative sources, as no information about bets on Bitcoin is available to the public. One of them was an individual, face-to-face survey of 1,800 households in collaboration with the social polling company CID-Gallup.

It was composed of 74 questions, first of all, on the implementation of Bitcoin as legal tender by the population, including Chivo Wallet, a software created by the government of El Salvador to facilitate its adoption, for the development of which $ 3.5 million was spent. Investment was made. In practice, the Chivo wallet proved to be one of the weakest links in the chain, as the short time in which it was developed prevented all of its systems from working correctly.

For the study’s authors, the fact that the survey was conducted in person was critical to its success.

“Given that Bitcoin adoption through the Chivo wallet requires access to both a mobile phone and an Internet connection, telephone or Internet surveys are dependent on respondents having access to the communication method, it is not automatically assumed that adoption Will reduce costs,” he wrote. In their survey, they interviewed households from 14 departments of the country and included participants from rural areas.

However, the survey was not the only tool to verify the volume of cryptocurrency usage. They complemented the analysis with blockchain verification of all transactions in which the Chivo wallet ecosystem intervened.

“We not only studied the total volume of transactions made through the Chivo wallet, but also analyzed the patterns of deposits and withdrawals separately, and identified coherence between the survey results and blockchain results,” they wrote.

Result

The survey found that 40% of respondents had downloaded the Chivo Wallet application in September 2021, when it was launched. Month after month, the numbers kept decreasing, even reaching 0 in 2022.

One of the elements that attracted researchers’ attention is that, contrary to government propaganda, Chivo did not serve to bank the population that was unbanked. The highest number of people downloading the application were those who were already familiar with electronic payments.

They wrote, “These results suggest that the introduction of the Chivo wallet has primarily provided an additional means of payment among those who are already banked, rather than encouraged greater financial inclusion among those who are unbanked.” To those who do not have banking facilities.”

The study found that 50% of respondents said they do not use Bitcoin because they do not understand and trust it. Additionally, they also showed reservations in similar percentage regarding Chivo Wallet software. Currency volatility ranked only 10% of the reasons for not using a crypto asset.

Therefore, the government intended that Bitcoin should be used by people who were not educated enough to use it at that time. This is consistent with the fact that only 1 in 5 of survey participants said they continued using the Chivo wallet after collecting the $30 bonus. And yet, they did not do so in order to conduct transactions in Bitcoin, but in dollars.

As far as companies are concerned, only the largest companies continued to accept cryptocurrencies for payments. But they did not keep their profits in it, but, almost always, decided to immediately convert it into dollars.

71% converted sales into dollars and then redeemed them, 17% converted sales into dollars and stored them in a Chivo wallet, and only 12% of businesses stored their sales in Bitcoin within a Chivo wallet.

“We found that 11% of companies have increased prices since Bitcoin became legal tender, which is consistent with the hypothesis that companies may be passing on cryptocurrency-related costs to customers,” the study said.

“This is a fundamental problem. We Salvadorans already have a globally accepted currency, which is stable. Switching to volatile, speculative digital assets was like migrating from the best world to the worst. To put it in Christian terms, this was nonsense. A solution to a problem that didn’t exist,” says economist Rafael Lemus.

A few days ago, President Nayib Bukele, who was on vacation, triumphantly published on his network that the price of Bitcoin had increased and with this he assured that his bet had paid off. Science studies show this is not true.

Economist Tatiana Marroquin commented via her account on X, “The bet was not on price but on use, which is the failure of millions of people.”

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