Bitcoin’s Struggles in El Salvador: Why Adoption Has Stalled

Despite El Salvador’s bold move to adopt Bitcoin as legal tender in 2021, a recent survey shows that 92% of Salvadorans still avoid using the cryptocurrency. This raises questions about the impact of the government’s multimillion-dollar investment on Bitcoin’s adoption.

Widespread Hesitation: Survey Reveals Bitcoin’s Limited Use

In 2021, El Salvador became the first country in the world to adopt Bitcoin as legal tender alongside the U.S. dollar. President Nayib Bukele championed the decision, which was presented as a way to boost the country’s economy, increase financial inclusion, and attract investment. Yet, three years later, it appears that the government’s ambitious cryptocurrency experiment has not caught on with the population.

A recent survey by the Center for Citizen Studies at the Francisco Gavidia University (UFG) reveals that 92% of Salvadorans still do not use Bitcoin for their transactions. This significant figure shows that most citizens have yet to embrace Bitcoin, raising essential questions about the effectiveness of the government’s efforts and the future of digital currency in the country.

The 2024 Rumbo País survey, ‘Do People Have Faith?’, offers valuable insight into the Salvadoran public’s perspective on Bitcoin. Despite the millions of dollars spent by the government to promote the cryptocurrency, the survey suggests that Bitcoin has not yet gained widespread acceptance.

The UFG survey, conducted between September 25 and 30, 2024, paints a sobering picture for Bitcoin enthusiasts. Only 7.5% of Salvadorans reported using Bitcoin for any transaction, while 92% stated they had never used it. This marks an increase in skepticism since 2023 when 88% of respondents in a similar survey by the University Institute of Public Opinion (IUDOP) at the Central American University (UCA) said they didn’t use the cryptocurrency.

These findings highlight a growing reluctance to adopt Bitcoin despite the government’s efforts to make it more accessible. According to the UFG study, most Salvadorans still prefer traditional currency for daily transactions, with Bitcoin remaining mainly on the economy’s fringes.

Bitcoin’s volatility and complexity may be part of the problem for many citizens. While digital currency advocates argue that Bitcoin can bypass traditional financial systems, many Salvadorans—particularly those unfamiliar with digital finance—fear its risks. In a country where most of the population relies on cash and informal financial services, shifting to a cryptocurrency-based economy has proven to be a daunting leap.

Has Bitcoin Improved the Country’s Finances?

One of the key arguments in favor of adopting Bitcoin was the potential to improve El Salvador’s economy. The government hoped that Bitcoin would increase financial inclusion, reduce remittance costs for Salvadorans working abroad, and stimulate growth by attracting foreign investors. But has it worked?

According to the IUDOP study published in early 2024, only 16.3% of the population felt that the economy had improved since adopting Bitcoin, 52.9% said it remained the same, and 18.6% believed it had worsened. These findings suggest that Bitcoin has not delivered the promised economic benefits.

For many Salvadorans, adopting Bitcoin has had little to no tangible impact on their financial lives. Most of the population still relies on the U.S. dollar for transactions. Remittance costs, a vital issue for Salvadoran families, have not significantly decreased despite Bitcoin’s potential to facilitate cheaper cross-border transfers.

Additionally, Bitcoin’s volatility has further contributed to public skepticism. While the cryptocurrency has seen periods of explosive growth, it has also experienced significant price drops, making it a less reliable store of value for many Salvadorans. With inflation and economic uncertainty still pressing concerns, many people prefer the stability of the U.S. dollar over the unpredictability of Bitcoin.

Government Investment in Bitcoin: A Risky Bet

El Salvador’s government, led by President Bukele, has substantially committed to Bitcoin. The government allocated $150 million to a trust fund to facilitate the conversion of Bitcoin to U.S. dollars, ensuring citizens could exchange the cryptocurrency without financial loss. According to a report from the human rights organization Cristosal, the total cost of the Bitcoin initiative is estimated to be around $329 million.

This heavy investment, however, has yet to pay off in terms of widespread adoption or economic improvement. The trust fund has primarily been used to stabilize Bitcoin’s value and ensure liquidity for the government’s cryptocurrency holdings. Still, it has not led to a meaningful increase in Bitcoin usage among the public.

While innovative, the government’s continued investment in Bitcoin carries significant risks. If the population remains reluctant to adopt the cryptocurrency, the millions spent promoting and stabilizing Bitcoin could become a financial burden. Critics of the initiative argue that the funds could have been better spent on other areas of development, such as infrastructure, education, or healthcare.

President Bukele, however, remains a vocal supporter of Bitcoin, often referring to it as a way to liberate El Salvador from the constraints of traditional financial systems. His government has embraced a pro-innovation stance, believing that Bitcoin will eventually pay off in the long run, mainly as more international investors take interest in El Salvador’s crypto-friendly policies.

What’s Next for Bitcoin in El Salvador?

Despite the low adoption rate, Bitcoin remains legal tender in El Salvador, and the government shows no signs of reversing its stance on the cryptocurrency. The country continues to position itself as a global leader in cryptocurrency adoption, hoping that international trends will eventually lead to greater domestic use.

For now, however, the focus may need to shift to addressing the barriers preventing Salvadorans from using Bitcoin. Education is likely a critical factor in overcoming public hesitation. Many Salvadorans lack knowledge about how Bitcoin works, and they are wary of its price fluctuations. Targeted educational campaigns could help demystify the cryptocurrency and encourage wider adoption.

Additionally, expanding access to the technology needed to use Bitcoin is essential. While smartphones are increasingly common in El Salvador, many still lack reliable internet access or the digital literacy required to navigate cryptocurrency platforms. Bitcoin will remain out of reach for much of the population without addressing these issues.

There is also the question of whether Bitcoin’s potential benefits—such as reducing remittance costs—can be realized in the current economic environment. If Bitcoin can prove to be a more efficient and affordable way for Salvadorans to receive money from family members abroad, it could become more appealing over time. However, this requires addressing the technological and financial infrastructure needed to make Bitcoin a practical option for everyday transactions.

El Salvador’s bold experiment with Bitcoin has yet to achieve widespread success. While the government has invested heavily in promoting cryptocurrency and positioning the country as a leader in digital finance, most Salvadorans still prefer traditional currency for their transactions. Recent surveys show a growing skepticism about the impact of Bitcoin on the economy, with many citizens seeing little change in their financial circumstances.

For Bitcoin to succeed in El Salvador, the government must address the barriers preventing its adoption, from public education to technological access. Otherwise, the millions spent on the initiative could become a missed opportunity for the country’s development.

Also read: El Salvador’s Third Fiscal Amnesty: A Path Forward?

As El Salvador continues to navigate its path as the world’s first country to adopt Bitcoin as legal tender, only time will tell whether the cryptocurrency will become a cornerstone of the economy or remain a niche form of payment used by a small percentage of the population.