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with SEC Bitcoin ETF Approval, crypto Twitter has been a place of excitement, so perhaps now is a good time to check out Bitcoin BTC in the real world. In 2021, El Salvador passed a law making Bitcoin compulsory tender.As of the end of last year, about 109,000 Salvadorans out of a population of 6.4 million (less than 2%) owned Bitcoin, and the country Ranked 55th About the Global Cryptocurrency Adoption Index. It seems that the introduction of virtual currencies in the real world may be fraught with difficulties.
Inspection results
For those of us fascinated by the history and future of money, El Salvador is an interesting place and a testing ground for testing the worldview of cryptocurrencies against reality. I have big plans. In addition to making Bitcoin compulsory, the president announced plans to build a “Bitcoin City” in the eastern part of the country that would harness the thermal energy of volcanoes. Part of this funding will come from $1 billion in Volcano bonds that are expected to be issued soon. Until Volcano supports enough Bitcoin miners to cancel the country’s debt, the country will remain heavily reliant on remittances, which make up a fifth of the economy.
I read that the cost of sending money from the US to El Salvador is: Up to 30-50% of value However, in a year in which the country received more than $7 billion in remittances, only $126 million was transferred in the form of cryptocurrencies. This means that Bitcoin accounts for less than 1.5% of remittances, and its share is actually falling, not rising. Virtual currency remittance is It fell by about 1/5 Compared to the previous year.
Its use appears to be similarly limited in Japan. The nonprofit National Bureau of Economic Research (NBER) found that the national cryptocurrency wallet (known as “Chivo”) is hardly used. It had all kinds of problems at launch, and many Salvadorans gave up on it after getting free Bitcoin incentives. Half of U.S. households downloaded a wallet when this law went into effect, but few have bothered with it since. Of these early adopters, two-thirds did not make any trades after spending their $30 incentive, and interestingly, one-fifth did not even use the incentive. (I was probably guessing the value).
In reality, the minority of people using the app are young, educated men and women with bank accounts, not the 70% of unbanked poor citizens targeted for rollout. The New York Times called Bitcoin a “currency of the regime” and said it was targeting foreign cryptocurrency enthusiasts. This seems a reasonable comment given that the country is targeting crypto whales to attract long-term residents into the country through a new “regime currency.” The “Freedom Visa” grants residency to up to 1,000 people per year who invest at least $1 million worth of cryptocurrencies.
Alex Gladstein, Chief Strategy Officer at the Human Rights Foundation and advocate for global Bitcoin adoption gave an accurate explanation: “Thibo is a promise to pay you Bitcoin or dollars. It’s no different than a bank account.” The amount of Bitcoin stored in these wallets has fallen by almost two-thirds in the first year of use Did. Although Bitcoin is a hot topic, adoption rates remain low, with few businesses willing to accept Bitcoin and even fewer customers willing to accept it. I’ll pay for it. It is certainly accepted at international chain stores such as McDonald’s and Starbucks SBUX, and it seems that mainly tourists use it.
(The epicenter of the Bitcoin revolution was Bitcoin Beach, but even there many companies have given up on Bitcoin and returned to cash.)
Payment choices.
© Helen Holmes (2024)
A survey by the Salvadoran Chamber of Commerce and Industry found that the overwhelming majority of businesses (nearly 90%) have never paid in Bitcoin, as Bitcoin is a forced bid. Only one in five is actually accepted at all. A separate survey by El Salvador-based El Instituto de Opinion Publica found that seven out of 10 Salvadorans do not believe the Bitcoin law has benefited their household finances. Another study found that three-quarters of small businesses in El Salvador do not accept Bitcoin payments. Of the companies that actually receive Bitcoin, almost all of them immediately exchange it for dollars.This was supported by a fact detailed research reported in a magazine scienceWe found that most companies that report their sales in Bitcoin convert them into US dollars. 71% converted their sales to USD and withdrawn them as cash, 17% converted their sales to USD and stored them in Chivo Wallet, and only 12% of companies kept their sales. With Bitcoin in your Chivo wallet.
(Rather interestingly, the detailed study also found that 11% of companies have increased their prices since Bitcoin went to mandatory bidding. (This is consistent with the hypothesis that costs may be passed on to customers.)
not much
Frank Musi, a policy fellow at the London School of Economics who has advised Latin American governments, says bluntly: “Bitcoin doesn’t solve any of El Salvador’s key economic problems.” Even if the government were to cover all the costs associated with it, it would only cost about $375 million. This is no big deal in his $29 billion economy. No real impact. The NBER concludes that “virtual currencies are hardly an accepted medium of exchange in El Salvador.” science Despite the status and incentives promoting Chivo, I think we can conclude that Bitcoin remains a speculative vehicle, as it reports that “digital payments were scarce and concentrated.”
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