Bitcoin is a form of digital currency that was created in 2009. Unlike traditional currencies, which are issued by central banks, Bitcoin is not subject to any central authority. Instead, it is “mined” by a network of computers that solve complex mathematical problems. Bitcoins can be used to purchase goods and services, and are also traded on various exchanges. While the value of Bitcoin has fluctuated wildly over the past few years, it has shown signs of stability in recent months. Some businesses have started to accept Bitcoin as a form of payment, and the currency has also gained traction as an investment vehicle.
It has been roughly 8 months since El Salvador made bitcoin legal tender and the Salvadorian government has certainly encouraged its citizens to switch. The government offered a $30 incentive to those that loaded the government’s Chivo bitcoin wallet and then encouraged usage with a $0.30 per gallon gas discount. According to a survey conducted by the National Bureau of Economic Research (NBER) these inducements drove 54% of Salvadorians to initially download the wallet but shows only 20% continue to use it. This relatively low usage is likely driven in part by low merchant adoption. Only 20% of companies report accepting bitcoin as a form of payment. One could argue that this supports the trope that new forms of payment are slow to be accepted and that old forms rarely die:
“Months after Bitcoin (BTC) became legal tender in El Salvador, a study conducted by the National Bureau of Economic Research (NBER) shows that 20% of businesses have started to accept BTC as a payment method.
The study, surveying adults from 1,800 households in El Salvador, aimed to measure the adoption of BTC in the country after the Bitcoin Law was passed. The researchers found that BTC is gaining ground compared to other payment methods.
According to the report, users who have downloaded the government-backed Chivo Wallet have “decreased their use of cash by 10%, while their net use of debit cards has been reduced by 11%.””
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group