El Salvador’s Bitcoin strategy continues to lose steam after 7.5 months

April 27, 2022, 3:45 PM UTC

El Salvador’s much-touted Chivo crypto wallets are fast falling out of favor in the country, just seven and a half months after their introduction in September 2021.

A new report by the U.S. National Bureau of Economic Research finds that just 20% of adult citizens in the country are using the Chivo Wallet app, despite a much larger number of initial downloads.

El Salvador, in an effort to encourage adoption, offers a $30 bonus to any citizen who downloads the app. That definitely drew interest, but only in the short term.

“Among those who have downloaded the app, over 60% did not use Chivo Wallet after spending their $30 bonus,” the report reads. “Moreover, most users who used Chivo after spending the $30 bonus do not engage with the app intensively. The median user reports no ATM withdrawals, and no payments sent or received in bitcoin in a given month.”

The agency also said it had found no evidence that Salvadorans were using Chivo Wallet to pay taxes or bills at any significant scale.

“Overall, we document that bitcoin is not being widely used as a medium of exchange,” the Bureau said.

Last September, El Salvador became the first world economy to make Bitcoin legal tender, passing a law requiring businesses to accept Bitcoin for goods and services. Bitcoin ATMs were also installed around the country.

Within two weeks there were signs of trouble. One of those ATMs was set on fire during a protest. Others didn’t work well; in the first week, officials admitted that of a line of people in front of one machine, just three had been able to withdraw money. And Chivo’s identity verification system was faulty, meaning some users found their accounts had been taken by hackers who spoofed their identity before they could register.

A separate report from the Republic’s Reserve Bank of El Salvador found that only 1.6% of remittances went through digital wallets in February 2022, the lowest percentage since Chivo’s creation.

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