Honors College Theses

Publication Date

12-14-2023

Major

Finance (BBA)

Document Type and Release Option

Thesis (open access)

Faculty Mentor

Axel Grossmann

Abstract

On September 7, 2021, President Nayib Bukele made Bitcoin a legal tender in El Salvador. This action cemented El Salvador as the first country in the world to make cryptocurrency a legal medium of exchange. As a new legal currency, Bitcoin could be used in any transaction, from purchasing a cup of coffee to paying taxes inside the country. This paper discusses the background of the decision to make Bitcoin a legal tender in El Salvador and addresses how it affects socio-economic problems. Finally, the study administered a survey to more than 300 individuals in El Salvador to investigate the perceptions of people with respect to the new Bitcoin law as well as Bitcoin in general and if people’s opinion differs based on certain socio-economic demographics. Based on 218 useable responses, we find statistically significant evidence that individuals in El Salvador distrust the Bitcoin law in general, are rather knowledgeable about Bitcoins, do not think the law was a good idea, and had a less favorable view about Bitcoin after the implementation of the new Bitcoin law. However, we find statistically significant evidence that the responses differ with respect to socio-economic demographics. The skepticism concerning the Bitcoin law is further shown in the high number of respondents (56%) who indicated that they did not sign up for the $30 of Bitcoin provided by the government when the law was implemented. Further, 54.6% of the responses indicated concerns of distrust of the government and 65.06% indicated concerns with respect to the price volatility of Bitcoin.

Thesis Summary

In September 2021, President Nayib Bukele declared Bitcoin as legal tender in El Salvador, marking the country as the first to adopt cryptocurrency officially. This decision allowed Bitcoin to be used in various transactions within the nation, from daily purchases to tax payments. The paper delves into the rationale behind this historic move and explores its impact on socio-economic issues. Conducting a survey among over 300 individuals in El Salvador, the study investigates public perceptions of the Bitcoin law and the cryptocurrency itself, examining differences across socio-economic demographics. Among 218 valid responses, notable findings indicate widespread distrust of the Bitcoin law, significant awareness about Bitcoin, unfavorable opinions on the law's implementation, and decreased favorability towards Bitcoin post-law adoption. These sentiments varied across socio-economic groups. Notably, 56% did not avail the $30 Bitcoin government offer, citing distrust (54.6%) and concerns over Bitcoin's price volatility (65.06%) as key reasons.

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