Cryptocurrencies and capital flows: Evidence from El Salvador's adoption of Bitcoin

Stefan Goldbach and Volker Nitsch

No 247, Darmstadt Discussion Papers in Economics from Darmstadt University of Technology, Department of Law and Economics

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findings that link digital assets to illegal activity as previously officially recorded financial transfers may have been replaced by unrecorded activities.

Keywords: crypto-assets; digital currency; legal tender; bitcoin (search for similar items in EconPapers)
JEL-codes: E42 E58 F21 F32 F38 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-fdg, nep-ifn, nep-mon, nep-opm and nep-pay
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https://www.econstor.eu/bitstream/10419/302552/1/1902099761.pdf (application/pdf)

Related works:
Working Paper: Cryptocurrencies and Capital Flows: Evidence from El Salvador’s Adoption of Bitcoin (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:darddp:302552

DOI: 10.26083/tuprints-00028016

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