Introduction

In 2021, El Salvador made headlines by announcing Bitcoin as its legal tender through a video address by President Bukele at the Miami Bitcoin Conference. This move initially caused confusion among its citizens, as details on how this shift would be integrated into the country's economy were not clear.

The decision raised concerns due to the country's historical economic challenges, transitioning to a dual circulation system of the native colón and the U.S. dollar in 2001. With people predominantly using the U.S. dollar for transactions, there were fears of a repeat scenario amid the sudden Bitcoin policy announcement.

Efforts were made to promote cryptocurrency usage, offering incentives to citizens who downloaded a specialized app. While half of the households downloaded the app, only a small segment actively engaged with it, reflecting challenges in widespread adoption.

President Bukele later introduced the concept of 'Volcano Bonds' to raise $1 billion through Bitcoin-backed bonds, aiming to establish a Bitcoin mining sector powered by renewable energy sources, including energy generated by the country's volcanic activity.

A 2023 research study in El Salvador explored the post-implementation impact of Bitcoin and the Chivo Wallet, following a government-led 'Big Push' initiative, shedding light on user behavior and adoption barriers. The study revealed low utilization of Bitcoin as a standard medium of exchange and diminishing Chivo Wallet usage over time, even though the app had a significant initial download rate.

Transparency issues, privacy concerns, and high adoption costs emerged as primary obstacles to widespread crypto adoption. Contrary to assumptions that cryptocurrency benefits the unbanked and financially vulnerable, the study found that affluent and banked individuals were the ones actively utilizing cryptocurrencies in El Salvador.