El Salvador's venture into cryptocurrency made headlines, but its historical significance remains to be seen. On September 7, 2021, it became the first country globally to adopt a digital asset, Bitcoin, as a legal tender, boasting a reserve of 400 BTC.
Cryptocurrency adoption is optional, offering Salvadorans the freedom to use it for transactions or savings. President Nayib Bukele introduced a national Bitcoin wallet dubbed “Chivo.” Upon setting up a Chivo account, citizens are rewarded with 30 USD worth of Bitcoin—a significant incentive considering the average monthly salary of a clerk in El Salvador is 304 USD.
However, the population's acceptance of Bitcoin remains uncertain.
According to a survey conducted by the Central American University (UCA), a Jesuit institution in El Salvador, a majority of Salvadorans oppose Bitcoin as legal tender. Reuters news agency reported these findings amidst expectations for the Salvadoran government to formalize Bitcoin's status on September 7, following President Nayib Bukele's announcement in June.
The UCA's survey highlighted considerable scepticism: approximately 90% of Salvadorans lack a clear understanding of Bitcoin, 80% have little to no confidence in its use, and 70% believe it should not be legal tender.
The government envisions Bitcoin reducing El Salvador's reliance on the USD (the current legal tender), stimulating economic growth, and creating new job opportunities. The country aims to serve as a "laboratory" for cryptocurrency adoption, with digital wallets and crypto-ATMs already operational. While only Bitcoin is becoming legal tender, people will also be able to manage Litecoin and Bitcoin Cash at ATMs.
Despite these advancements, challenges persist due to the economy's heavy cash dependence and only 58% of the population having internet access. The journey towards widespread Bitcoin adoption may be gradual, contingent on further development of mobile networks.
Presently, the Salvadoran government retains control over Bitcoin wallets, with the Chivo wallet being the sole access point for engaging with Bitcoin. Questions about future competition among wallets and whether ordinary citizens will embrace Bitcoin for transactions or savings remain open.
El Salvador's experiment with cryptocurrency stands as a monumental, real-life trial for the crypto revolution.
