- does not appear to be a viable commercial or financial tool for the private sector in the Central American country.
- Entrepreneurs sponsor a business innovation event where bitcoin does not act as a central axis.
- Studies conducted so far show low usage of cryptocurrency in day-to-day business operations.
Executive Director of the National Association of Private Enterprise of El Salvador (ANEP) Leonor Selva stated that entrepreneurs in her country are working towards the technological transformation of companies, but stressed that Bitcoin (BTC) has not played a role in this process.
Almost a year ago, El Salvador recognized BTC as legal tender. However, neither citizens nor entrepreneurs have embraced cryptocurrency as a major investment or commodity.
In an interview, Selva commented that companies are currently going through a “reduction in the use of Bitcoin”. According to the executive, bitcoin “has not achieved the results of opening new markets or creating more opportunities for economic revitalization as proposed.”
Despite this, the private sector continues to abide by the “Bitcoin Law,” which obliges businesses and corporations to accept BTC as payment, Selva clarified.
Digital innovation without BTC
Leonor Selva’s comments on BTC came in the context of a business innovation and digital transformation event the business association is organizing for October. A number of relevant figures from international business are expected to attend the process.
ANEP’s President, Agustín Martínez, explained that the business meeting “is intended to promote change and guide companies on what needs to be done to develop and implement a digital economy”. He stressed that for this purpose it is necessary to identify the opportunities and challenges of the current economy. The general assessment of bitcoin by Salvadoran individuals a year after its approval was overall negative. Former Governor of the Central Bank of El Salvador Carlos Acevedo reiterates the feeling that the digital asset has not met the main goals promised by the government; These include financial inclusion and reducing the cost of remittances to El Salvador.
A survey conducted in February by three U.S. economists and later released by the U.S. National Bureau of Economic Research found that only 10% of Salvadorans continue to use bitcoin in day-to-day operations.
The study also highlighted that 90% of Salvadorans stopped transacting on the platform after the issuance of the $30 inducements deposited by the government in their Chivo digital wallet accounts.
One of the study’s authors, University of Chicago economist Fernando Alvarez, told the New York Times that “the government gave this project the impetus that could be expected, and yet it failed.” A survey conducted in March by the Salvadoran Chamber of Commerce and Industry found that just 14% of the country’s businesses had transacted using BTC since its approval in September 2021, while just 3% reported a perceived commercial value with the cryptocurrency.
On the flip side
- Although Salvadoran businesses and residents appear to have little confidence in Bitcoin, President Nayib Bukele’s government shows no signs of intending to change its cryptocurrency-centric economic policies.
- The government has been unable to attract new investments based on the digital asset, which has hampered the execution of projects and the launch of the anticipated Volcano bonds.
Why you should care
- As one of two governments to officially adopt BTC as legal tender, the impact of cryptocurrency use in El Salvador is impacting the global crypto market.
- The Salvadoran government had to buy its own debt to alleviate financial pressures from the threat of late payment dates this year and the lack of a refinancing agreement with the International Monetary Fund.
On Monday the 12th, Bukele made an offer to buy back foreign debt maturing between 2023 and 2025 for approximately $360 million. The announcement was made via the President of El Salvador’s (NYSE:) Twitter account.
For more information on the adoption and use of Bitcoin in El Salvador, see the following articles:
Bitcoin & Surf: The Revival of Bitcoin-Powered Tourism in El Salvador
El Salvador is buying back its own debt before launching Bitcoin (BTC) bonds
Read more on DailyCoin