A year has passed since El Salvador became the first country in the world to adopt Bitcoin (BTC) as legal tender. The decision was considered a footprint for the rest of the countries that intend to follow the same path at a point where Bitcoin is still maturing.
On the adoption date of September 7, 2021, Bitcoin was trading at $47,767, but has since lost its value by 60.52%, trading at $18,857 at press time. Interestingly, during the period, Bitcoin also hit an all-time high of nearly $68,000 at the end of 2021. In addition to price, adoption has faced a host of challenges.
The decision to adopt Bitcoin caused the government to embark on an ambitious plan to market El Salvador as the crypto hub. The plan involved initiatives such as the accumulation of Bitcoin.
Dipping Bitcoin Wallet Downloads
To promote the adoption of Bitcoin, the Salvadoran government introduced the Chivo digital wallet, where residents would get a bonus of $30 for downloading. However, the state has not shared data on the use of the wallet. Just a month after Bitcoin was legalized, President Nayib Bukele claimed that around 25% of the country’s population was using the wallet.
Interestingly, a survey conducted by the National Bureau of Economic Research (NBER), a US-based NGO, revealed that only 20% of residents who initially downloaded the app still use it. Notably, most only downloaded the wallet to use the free credit. Reports indicate that there have been almost no downloads in 2022.
In addition, President Bukele had promised to build a “Bitcoin City”, a plan that has not materialized to date. The city was meant to be a tax haven for crypto companies setting up camp in the country.
Despite the lack of progress in Bitcoin City, El Zonte, a beach in El Salvador that has been renamed “Bitcoin Beach,” is expected to receive more than $200 million in infrastructure improvements in a plan to be implemented by the government. .
More importantly, the main obstacle in the adoption of Bitcoin in the country has been the lack of sufficient education and confidence in the use of the flagship cryptocurrency. At the same time, the resident’s motivation to use Bitcoin has been affected by the high volatility of the asset.
In support of the initiative, a new law was passed that requires all companies to accept cryptocurrencies. However, only 20% of them have chosen to incorporate digital assets into their system.
Although Bitcoin’s legal status was meant to boost the economy, the initiative appears to be floundering. For example, the recent collapse in the value of Bitcoin has complicated things for the country as it seeks funds to pay off $1.6 billion in sovereign bonds due in 2023 and 2025.
Pressure to review Bitcoin’s legal tender status
In addition, El Salvador’s decision continues to receive criticism from international organizations. In this case, the International Monetary Fund (IMF) has been pushing the country to review Bitcoin’s legal tender status citing financial, economic, and legal concerns.
It is worth mentioning that the adoption of El Salvador has inspired other countries in the region to consider Bitcoin. Most countries are experiencing economic difficulties characterized by high inflation and devaluation of local currencies. Therefore, the situation makes Bitcoin a perfect choice as the asset acts as a hedge against tough economic times.
Meanwhile, President Bukele remains defiant and maintains that the Bitcoin strategy is on the right track.
El Salvador’s post-Bitcoin strategy yet to take off as BTC drops 60% in a year since adoption appeared first on Coinphony.