The launch of El Salvador’s national bitcoin wallet, called Chivo, has been a flop, with most users already abandoning it, according to a paper published last month by economists at the National Bureau of Economic Research. The study is one of the first intensive non-governmental efforts to measure the success of the country’s national cryptocurrency push.
The study, conducted by the nonprofit based in Cambridge, Massachusetts, surveyed 1,800 homes in cities and rural areas. Where Chivo has had modest windfall success, it’s banking without a hitch. The researchers say that those who continue to use the Chivo Wallet are using it to hold and transfer the dollar, the official currency of El Salvador, just like someone who uses a digital wallet or bank. Some respondents told researchers that they use the app as a debit card for dollars, with 20% of Chivo users saying they spend less cash now.
“There is no experiment where a currency was introduced with such a strong incentive and still has failed,” said Fernando Alvarez, an economist at the University of Chicago and one of the study’s authors. rest of the world,
Chivo was launched in September 2021, when President Nayib Bukele made El Salvador the first country in the world to make bitcoin legal tender. The app, which stores and exchanges bitcoin, saves Salvadorans on the $6 billion remitted to the country from overseas each year in fees and boosts the economy, he said.
Things have not gone according to plan, however. The launch of the Chivo was plagued with functionality and security issues. However, nearly half of the Salvadorans surveyed have downloaded Chivo to date, with 40% of those downloads occurring in September 2021, with about 61% of them withdrawing the $30 dollar sign-up incentive It has been abandoned, the National Bureau of Economic Research found. According to the Central Bank of El Salvador, only 1.6% of all remittances via digital wallets were received in bitcoin in February 2022.
Meanwhile, many people living in tourist hot spots on the Pacific Coast, where bitcoin usage is highest, have transitioned to other crypto wallets, such as the privately developed Bitcoin Beach.
“Don’t even talk to me about Chivo,” said Carolina Reyes, who sells snacks to tourists in the surf village of El Palmarcito. “It’s not safe, so I’m not going to go near it.” She said she was one of at least 1,000 people who logged into the app in September last year, only to find that their identity was used to steal a $30 dollar sign-up bonus.
Chivo download numbers have been negligible in 2022, suggesting that the push has run out of steam. Some of those who stuck with the application are using it for transactions unrelated to bitcoin. The survey found that the average active user does not send or receive a single bitcoin payment or make any Chivo ATM withdrawals in a month.
The fact that Chivo saw mass adoption but dropped it after the bonus was withdrawn shows that bitcoin in its current form is “not such an effective means of payment,” Alvarez said. The study revealed that some of Chivo’s transactions have commercial or major use cases. According to Alvarez, the average user did not have an incentive to continue using bitcoin instead of the dollar.
The findings suggest that millions of dollars in taxpayer money have been spent on building an app that acts more as a primary digital wallet than a novel technology that could help turn El Salvador into a regional tech hub. It is, said Oscar Salguero, a software engineer. Cryptocurrency enthusiast from San Salvador. Chivo is a “very expensive Square or Cash app clone that is used by an incredibly small and niche user base,” he said. rest of the world,
But keeping dollars in Chivo may not be as secure as it seems. Local media outlets on 27 April Electricity house Turns out that users do not actually hold US dollars in their Chivo wallet, but rather stable-dollar coins that could be backed by the Salvadoran government or private company. Experts told Electricity house That it is concerning that Chivo is being used as a large bank without following normal financial regulations.
“It’s a hoax on the part of the government, because it never told the citizens” [that they hold digital tokens instead of Bitcoin or dollars]Carlos Acevedo, economist and former chairman of the Central Reserve Bank of El Salvador rest of the world, ,Additionally, if the Chivo Wallet is used extensively and at some point people want to withdraw their money, they may find that this money does not exist.”