In a surprising turn of events, El Salvador, the first country in the world to adopt Bitcoin as legal tender, has witnessed a noteworthy decline in crypto adoption. A recent survey conducted in 2023 has revealed that the usage rate of Bitcoin in the Central American nation has dropped significantly, standing at a mere 12%.
This development marks a departure from the initial enthusiasm and optimism that surrounded El Salvador’s historic decision to embrace digital currencies, raising questions about the sustainability and effectiveness of the country’s pioneering approach to cryptocurrency integration.
El Salvador’s Bitcoin dream is not going according to plan
The findings of a recent study conducted by José Simeón Cañas Central American University revealed a varied perspective concerning the perceived relationship between Bitcoin adoption and improvements in individual well-being.
In 2023, 12% of the local population in El Salvador used Bitcoin to pay for products and services, according to the survey. This represents a substantial decline compared to 2022 when the aforementioned university documented that 24.4% of the Salvadoran population had participated in Bitcoin transactions.
Concerns were expressed regarding the sustainability and broad applicability of the preeminent cryptocurrency asset in routine transactions in light of the decline in numbers.
A majority of those who engaged in Bitcoin transactions did so no more than one to three times, comprising 49.7% of the total. Conversely, 20% of the participants reported using Bitcoin for 10 transactions or more, suggesting a significant disparity in the frequency of crypto applications.
In contrast, 22.9% of respondents used Bitcoin to purchase groceries, with supermarkets following closely behind at 20.9%. Unexpectedly, 15% of participants indicated that they conducted transactions at veterinary clinics using Bitcoin, demonstrating the wide array of companies that have integrated the digital currency into their payment frameworks.
In 2023, 6.8% of respondents reported that their family’s circumstances had improved over the previous year, which coincided with the legalization of Bitcoin as a tender. In 2022, this percentage stood at 3%.
Although this finding implies a positive correlation, it is crucial to emphasize that a significant proportion of participants (93.2%) did not ascribe any personal advancements to their use of Bitcoin.
In contrast to the observed positive correlation between the adoption of Bitcoin and individual well-being, the survey findings indicate a divergence between the usage of cryptocurrencies and individuals’ perceptions of the broader economic climate in El Salvador.
A mere 0.5% of the participants hold the belief that Bitcoin has contributed to the advancement of the nation’s economy. Conversely, a majority of participants (34.3%) ascribe the perceived enhancement in the economy to a reduction in criminal activities (24.3%).
El Salvadors’ crypto market situation
The country’s government partnered with stablecoin issuer Tether to launch the “Adopting El Salvador Freedom Visa Program.” Applicants must make a non-refundable deposit of $999 in Bitcoin or USDT, and those who are accepted must go through a Know Your Customer (KYC) verification process.
The Digital Assets Commission also approved El Salvador’s Bitcoin-backed bonds, known as Volcano Bonds. According to the National Bitcoin Office (ONBTC), these bonds will be available through Bitfinex Securities, a licensed division of the cryptocurrency exchange Bitfinex.
El Salvador’s President bets millions in profit on BTC ETFs
El Salvador has $12.6 million in unrealized earnings from its bitcoin investment after being in the red for two years, according to Nayibtracker statistics.
The country began purchasing bitcoin in September 2021, paying $47,250 to $52,670 for 700 BTC over the course of two weeks. Last month, President Nayib Bukele praised the investment for being “back in the black.”
In November 2022, Bukele stated that El Salvador would buy one bitcoin each day for the foreseeable future. Assuming it has done so, the country has added 419 BTC to its holdings, raising the total to 2,798 bitcoin ($131.3 million).
With the approval of BTC ETFs, its just a matter of time until the crypto world can see what becomes of the bet El Salvador made on BTC.