Cryptocurrencies and Capital Flows: Evidence from El Salvador’s Adoption of Bitcoin

Stefan Goldbach and Volker Nitsch

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: This paper explores a monetary experiment, the adoption of Bitcoin as legal tender in El Salvador in 2021, to analyze the impact of digital currencies on international capital flows. Using a difference-in-differences approach, we find that, instead of making transfers easier, El Salvador’s official cross-border financial activity has decreased after the monetary change. This finding may reflect an increase in uncertainty. However, it is also in line with findings that link digital assets to illegal activity as previously officially recorded financial transfers may have been replaced by unrecorded activities.

Date: 2024-09-05
New Economics Papers: this item is included in nep-ban, nep-ipr, nep-mon and nep-pay
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Published in Darmstadt Discussion Papers in Economics 247 (2024-09-05)

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Persistent link: https://EconPapers.repec.org/RePEc:dar:wpaper:149484

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