Saudi Bitcoin law is half a year old, volcano mining, Bitcoin bonds default, new report reveals old wounds: only 20% of the population have installed a wallet.

The country of El Salvador has been using Bitcoin for over half a year now. However, the heavily promoted volcano mining project has yet to materialize. The "Bitcoin bonds" have been indefinitely delayed, and a recent research report indicates that the Chivo wallet now has only 20% of its initial adoption rate, with almost no downloads this year. The report suggests that if there were no $30 incentive for installing the wallet at launch, 75% of users would not have downloaded Chivo.

Local Perspective

The international non-profit news organization "Rest of World" interviewed a local citizen, Bonilla, in March, who raised the following complaints:

• The only available Bitcoin ATM is too far away.
• Services from relevant public institutions are slow.
• There is too much price volatility.

Bonilla runs a shoe store and heard that Bitcoin could lower payment costs and offer faster transaction speeds, so he decided to adopt it. However, after losing a $25 deal due to technical issues and never receiving a response from the cryptocurrency wallet customer service, he decided to discontinue its use and now prefers cash.

Instances of technical issues with the cryptocurrency wallet Chivo are widespread, but Salvadoran President Nayib Bukele, who has a controversial history, still seems determined to proceed with its adoption.

Computer scientist and active crypto advocate Mario Gomez was detained by the police without an arrest warrant after posting a series of comments on Twitter before the release of the Chivo wallet. Authorities claimed it was to investigate possible financial fraud he may have committed.

Reports from three months after the Bitcoin law was enacted indicated a polarized adoption rate of cryptocurrencies in El Salvador. Apart from the beach town "El Zonte," which had already formed a small economy using Bitcoin, the adoption rate of Bitcoin elsewhere was very low.

Decline in Chivo Adoption Rate

Following the indefinite delay of Bitcoin bonds, interest in El Salvador has gradually waned. However, a report from the National Bureau of Economic Research (NBER) has reignited discussions on whether the first country to adopt Bitcoin as legal tender is heading towards failure.

The data in this public opinion report was gathered through face-to-face interviews with 1,800 Salvadoran adult households in February of this year, with a margin of error of 2%. Some key points mentioned include:

• The Chivo wallet had almost no downloads in 2022.
• Chivo's main downloads were concentrated around the time the law was passed in September of last year.
• Only 20% of Salvadorans who downloaded Chivo, spent the $30 registration bonus and are still using it.

Despite being online for over half a year, 30% of those surveyed were still unfamiliar with Chivo, while the rest mostly learned about it through social media.

The report indicates that the low adoption rate is primarily due to a preference for cash and secondly due to trust issues, as respondents simply do not trust Chivo or Bitcoin.

The NBER estimates that if there hadn't been a $30 incentive at the launch of the wallet, 75% of the users who had downloaded it would not have done so. According to statistics, $30 is roughly equivalent to 4 days' worth of the local minimum wage.

Not only is the download rate low, but only 11% of the population had used Chivo for remittances. In 2020, remittances to El Salvador amounted to nearly $6 billion, but by February of this year, it had dropped to 1.6%. Only 5% of people had used the Chivo wallet for tax payments.

Public Opinion

Economist from El Salvador, Rommel Rodríguez:

I am skeptical about Bukele's plans to involve Bitcoin enthusiasts in solving El Salvador's economic issues. In terms of the economy, this government's characteristic is improvisation. I predict that Bukele can obtain a large sum of money from Bitcoin enthusiasts and bet El Salvador's future on Bitcoin. If he now turns back to accept the advice of the International Monetary Fund (IMF), it will undoubtedly severely damage his international reputation.

Strategist at Human Rights Foundation and Bitcoin advocate Alex Gladstein:

To me, his intentions are clear. He is seeking personal gain and fame.

Former President of El Salvador, Mauricio Funes:

Persistently pursuing a Bitcoin-based solution has cost El Salvador heavily, "strangling" its relationship with the IMF. In reality, issuing such bonds is impractical and will only complicate matters. He needs to renegotiate debt with the IMF.

On the optimistic side, BitMEX founder Arthur Hayes believes that whether for reserves or payments, Bitcoin is a better solution:

For countries like El Salvador with minimal recurring surpluses, gold is easy to buy and reserve, but trading with it is time-consuming, expensive, and not a practical payment mechanism. El Salvador can reserve $121 million in gold or $121 billion in Bitcoin at the same cost. It remains a well-running economy. The IMF's concerns stem from outdated and unhelpful economic policies. I look forward to other small countries following suit.

Former columnist for CoinDesk, David Z. Morris, believes that debt-laden El Salvador has nothing much more to lose.

Furthermore, El Salvador's Tourism Minister Morena Valdez emphasizes that since adopting Bitcoin, foreign visitors have increased by over 30%, making it perhaps the most significant and direct economic benefit since adopting Bitcoin.