Bitcoin’s volatility impact on merchant acceptance in El Salvador

El Salvador’s ambitious goal of becoming a global leader in Bitcoin adoption is facing obstacles that go beyond President Nayib Bukele’s recent re-election victory. Despite his strong support for cryptocurrency, challenges persist in achieving widespread Bitcoin adoption in the Central American nation.

El Salvador president Bukele’s Bitcoin vision

Nayib Bukele, who served as the president of El Salvador played a pivotal role in making Bitcoin legal tender in the country. His landslide re-election victory securing 83% of the votes counted, solidified his position as a Bitcoin advocate. 

However, the road to success for El Salvador’s “Bitcoin experiment” is proving to be more complex than anticipated.

Tech literacy and Chivo wallet woes

One of the key challenges has been the tech literacy of the population. According to Jamie Robinson, Chief Strategy Officer of The Bitcoin Hardware Store, the issues began with the launch of El Salvador’s Chivo Wallet. Robinson asserted that the wallet had a troubled start, which created a negative initial impression.

BREAKING: The 1st #Bitcoin President Nayib Bukele has officially been re-elected in El Salvador

We are watching history 🇸🇻pic.twitter.com/ia18Ifc4kH

— Rizzo (@pete_rizzo_) February 5, 2024

 Even after initial problems were addressed, Chivo devices often remained uncharged and outdated, and many merchant employees lacked the technical knowledge required for reinstallation.

Lack of Customer Demand

The fluctuating Bitcoin market has affected El Salvador‘s Bitcoin adoption. The dramatic drop in Bitcoin’s price from its all-time high of $69,000 to as low as $15,600 in early 2023 led to a decrease in customer demand for using Bitcoin as a means of payment

A “temporary death spiral” was noted by Robinson as the cryptocurrency’s value declined.

 a mere 12% of the local population used Bitcoin for payments at least once, down from the previous year, according to a survey by José Simeón Cañas Central American University.

 Even though merchants are legally required to accept Bitcoin, former Cointelegraph reporter Joe Hall’s attempt to pay for everything in Bitcoin was largely unsuccessful due to many merchants refusing to accept the cryptocurrency.

Private sector intervention and slow progress

While government mandates initially threatened businesses with consequences for not accepting Bitcoin, Robinson reported that no fines or penalties have been imposed.

 The private sector has stepped in to assist the government in addressing these challenges, with several casinos and restaurants now making efforts to accept Bitcoin payments, especially as Bitcoin’s price trends upwards once again.

A patience-driven process

Roman Martínez, a community leader at Bitcoin Beach, emphasized the importance of patience in the Bitcoin adoption journey of a nation where a significant portion of the population has limited access to traditional banking services.

 Approximately 70% of the population remains “unbanked,” making it unrealistic to expect an overnight transition to cryptocurrency use.

Martínez stated, “We’re moving forward, but it’s a process.”

Educating on Self-Custody

In addition to overcoming the hurdles of acceptance and understanding, El Salvador is also focused on educating its population about the significance of self-custody of cryptocurrencies. 

This has led to the establishment of The Bitcoin Hardware Store, which aims to promote self-custody practices among Bitcoin users.

Many new Bitcoin users are purchasing the cryptocurrency but storing it on exchanges or with custodial wallets, neglecting the vital step of self-custody.

 The Bitcoin Hardware Store, located in El Zonte, often referred to as “Bitcoin Beach,” serves as a hub for curious users to seek guidance and enhance their understanding of self-custody practices.