Are cryptocurrencies currencies? Bitcoin as legal tender in El Salvador

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 bitcoins 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.