Are Cryptocurrencies Currencies? Bitcoin as Legal Tender in El Salvador

Fernando E. Alvarez, David Argente and Diana Van Patten

No 29968, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E4 E41 E42 (search for similar items in EconPapers)
Date: 2022-04
New Economics Papers: this item is included in nep-ban, nep-mac, nep-mon and nep-pay
Note: AP EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published as Fernando Alvarez & David Argente & Diana Van Patten, 2023. "Are cryptocurrencies currencies? Bitcoin as legal tender in El Salvador," Science, vol 382(6677).

Downloads: (external link)
http://www.nber.org/papers/w29968.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:29968

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w29968

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().