Are Cryptocurrencies Currencies? Bitcoin as Legal Tender in El Salvador / Fernando E. Alvarez, David Argente, Diana Van Patten.

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Alvarez, Fernando E

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w29968.Publication details: Cambridge, Mass. National Bureau of Economic Research 2022.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: A currency's essential feature is to be a medium of exchange. We leverage a quasi-natural experiment--El Salvador as the first country to make bitcoin legal tender--to study a cryptocurrency's potential to be used in daily transactions. The government also launched and provided incentives to download and use a digital wallet named Chivo, which shares features with Central Bank Digital Currencies (CBDCs) and allows users to trade bitcoin and dollars. Were Chivo Wallet and bitcoin actually adopted after this "big push"? Conducting a representative face-to-face survey and relying on blockchain data to obtain all Chivo transactions, we document how usage of digital payments and bitcoin is low, concentrated, and has been decreasing over time. We find that privacy concerns are key barriers to adoption, which speaks to a policy debate on crypto and CBDCs that has had anonymity at its core. We also estimate the technology's adoption cost and its network externalities.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w29968 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w29965 Representation Failure /	nber w29966 Career Concerns and the Dynamics of Electoral Accountability /	nber w29967 Interdependent Preferences and the Mitigation of Market Failure /	nber w29968 Are Cryptocurrencies Currencies? Bitcoin as Legal Tender in El Salvador /	nber w29969 The Demand For Protection and the Persistently High Rates of Gun Violence Among Young Black Males /	nber w2997 Self-Reported vs. Objective Measures of Health in Retirement Models /	nber w29970 Causal Effects of Countercyclical Interest Rates: Evidence from the Classical Gold Standard /	Next

April 2022.

A currency's essential feature is to be a medium of exchange. We leverage a quasi-natural experiment--El Salvador as the first country to make bitcoin legal tender--to study a cryptocurrency's potential to be used in daily transactions. The government also launched and provided incentives to download and use a digital wallet named Chivo, which shares features with Central Bank Digital Currencies (CBDCs) and allows users to trade bitcoin and dollars. Were Chivo Wallet and bitcoin actually adopted after this "big push"? Conducting a representative face-to-face survey and relying on blockchain data to obtain all Chivo transactions, we document how usage of digital payments and bitcoin is low, concentrated, and has been decreasing over time. We find that privacy concerns are key barriers to adoption, which speaks to a policy debate on crypto and CBDCs that has had anonymity at its core. We also estimate the technology's adoption cost and its network externalities.