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The Economic Impact of the Adoption of Bitcoin as Legal Tender in El Salvador: A Socio- Economic Perspective on Impact on Income Distribution Student’s Name Course Course Number Mayra Mas EU Business School Barcelona Date

Declaration I want to express my gratitude to my parents for their unwavering support throughout my path. They have never left my side and have always provided me with the appropriate tools I need to realise my full potential and pursue my goals. To My grandparents, I can never be enough thankful for having them in my life. They have been my idols growing up and always have given me the right advice needed to keep on going. It is undoubted that without their support none of my academic and non-academic achievements would have been possible. To the friends I met along the way before starting my journey outside my country and the new friends I met in Barcelona, and those that came close as family can be: I thank you all for timely support and companionship. I would love to thank all the people at EU Business School for my experience, which has been marked by their enduring commitment to maximizing students’ excellence. I would like to pass my sincere appreciation to Prof. Fern Herraiz for changing my view of Global Business and Economics. My acknowledgement also goes to Prof. D. Alonso for being a great guide and overall great teacher. Finally, I would like to express my gratitude to Professor Mayra Mas. Despite her strict teaching approach in the accounting course, I can confidently say that she played a pivotal role in fostering my love for the accounting world. I also extend my appreciation to all my counselors who provided valuable guidance throughout this journey.

Executive Summary This research looks into the socioeconomic repercussions of El Salvador's pioneering use of Bitcoin as legal money. El Salvador's unique status as an early adopter presents an interesting case study in a modern financial ecosystem disrupted by cryptocurrencies. This study looks at how it affects financial inclusion, remittances, economic stability, and income distribution. The study takes a mixed-approaches approach, integrating quantitative analysis of secondary data sources with qualitative methods including surveys and focus groups with Salvadorans, officials, and bitcoin users. Notably, the study's hypothesis formulation implies that high-income persons may have profited more from Bitcoin adoption, raising concerns about the cryptocurrency's influence on economic disparities. El Salvador's Bitcoin journey has not fulfilled all expectations, with price volatility and economic uncertainty posing hurdles. This highlights the importance of conducting a thorough research to examine the socioeconomic repercussions and give insights for policymakers and stakeholders in the cryptocurrency industry. The influence of public policy, government efforts, and the complicated regulatory landscape in affecting the consequences of bitcoin adoption becomes clear throughout the study. Government regulations, taxes, and economic diversification goals all have a substantial impact on the acceptance and impact of cryptocurrencies. Understanding their interaction with wealth distribution is critical to understanding the economic developments associated with Bitcoin adoption.

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1. Introduction This introduction chapter lays the groundwork for the rest of the investigation, beginning with a thorough examination of the study's setting and reasoning. The acceptance of Bitcoin as a legal form of currency has triggered a transformational wave in the modern financial environment, upending old economic standards. Over the last decade, cryptocurrency, a breakthrough digital money paradigm, has had a tremendous influence on financial and economic institutions all over the world. Its ongoing evolution provides a fascinating backdrop for this inquiry, emphasizing the critical necessity to examine the subject matter. El Salvador, a pioneering nation in embracing Bitcoin as a legal tender, stands as a noteworthy case study in this regard. The chapter delves further into the research's underpinning by elaborating on the carefully formulated research problem, primary objectives, and sub-objectives, outlining the essential research questions to be explored. It also underscores the significant importance of the study and the driving forces that instigated its undertaking. The unfolding narrative highlights the compelling motivations that propel this investigation forward. Consequently, this introduction not only provides context and justification but also sets the stage for the subsequent chapters in the report, offering readers a structured preview of the report's overall framework and direction. 1.1. Study Background 1.1.1. Context of the Study Unlike traditional currencies issued and regulated by governments, cryptocurrencies operate on decentralised systems, particularly blockchain technology. Blockchain is a distributed ledger that records and verifies transactions across a network of computers, providing security and transparency. The first and most well-known cryptocurrency, Bitcoin, was introduced in 2009 by an anonymous entity known as Satoshi Nakamoto. The ascent of Bitcoin since its

inception has been exceptional, with its worth growing by more than 5000% between 2010 and 2022, making it one of the most successful currencies in history. According to Taskinsoy (2021, p. 3), the rise of Bitcoin can be attributed to several factors, including increased awareness and adoption, improvements in technology, and growing mainstream recognition. This development has caused a global rethink of money. Therefore, as cryptocurrencies continue to evolve and influence the financial world, understanding their impact on income distribution, financial inclusion, and overall socio-economic dynamics becomes paramount. Figure 1: Evolution of the global crypto economy showing number of cryptocurrencies, overall market capitalization, and Bitcoin’s market share (Statista, 2023) 1.1.2. The El Salvador Situation In practice, the adoption of cryptocurrencies appears promising for developing nations such as El Salvador. In this Central American nation, cash transactions dominate, with more than half of the population exclusively utilizing cash instead of credit or debit cards. Furthermore, around 70% of households lack access to conventional banking services, since only 30.71% of the adult population owned a bank in 2021, and almost 90% are not involved in mobile banking activities (Gaikwad & Mavale, 2021, p. 114). The introduction of a digital payment platform has

the potential to significantly improve economic inclusivity and accessibility in this context. This context accentuates the pressing need for alternative financial solutions to foster economic inclusivity and enhance accessibility in a society where a significant portion of the population remains underserved by traditional financial institutions. Figure 2: Percent people with bank accounts in El Salvador (The Global Economy, 2022) For El Salvador, launching the Chivo Wallet in September 2021 was a significant step towards leveraging cryptocurrency as a tool to address the pressing need for alternative financial solutions. Chivo Wallet is an electronic wallet created by the Government of El Salvador to make payments in dollars or Bitcoin. If any user wants to withdraw the balance in dollars from your Chivo Wallet, you must first convert them to Bitcoin and then do the withdrawal process through Special ATMs, which will give you US dollars in cash; pretty much anyone could trade bitcoins into cash which predominates in the way Salvadorians do monetary transactions. Its commitment to this transition was buoyed by various government-led incentives to encourage households and increase the pace of this technology’s diffusion among economic actors in El

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Salvador (Álvarez et al., 2022, p. 2). These included $30 in free bitcoin with each download, which is nearly 1 percent of average annual per capita income (Álvarez et al., 2022, p. 2). Bitcoin adoption was extended to addressing one of the country's most pressing economic challenges: the cost of remittances sent home by Salvadorans working abroad constitutes a significant portion, approximately 20 percent, of the country's GDP (Burke, 2022, p. 3). However, recent reports indicate the country’s experiment with Bitcoin has not achieved the desired financial goals. According to Sigalos (2022, p. 2), the government's cryptocurrency reserves have significantly decreased, while the widespread adoption of Bitcoin in the country hasn't met expectations. What's particularly urgent is the country's pressing need for a substantial amount of liquid assets to fulfill debt obligations exceeding $1 billion within the next year. This situation unfolds against the backdrop of a substantial decline in the price of Bitcoin, dropping over 70% from its peak in November 2021 and more than 55% from the moment President Bukele unveiled his cryptocurrency adoption plan (Sigalos, 2022). The recent developments in El Salvador reveal significant economic challenges and uncertainties related to cryptocurrency adoption, justifying the need for a study to assess the socioeconomic implications, successes, and shortcomings of this pioneering approach. 1.2. Research Problem The examination problem zeroed in on the significant socioeconomic implications of El Salvador's adoption of Bitcoin as a legal tender. While advocates contend that Bitcoin can offer more financial inclusivity and decreased costs, there are developing worries over its volatility, accessibility, and potential for fuelling economic disparity (Carmona, 2023, p. 2). El Salvador's decision to adopt Bitcoin as a legal tender is an unprecedented experiment. Its current outcome has revealed challenges and uncertainties that have multifaceted socioeconomic implications and

raised the critical question of how such a shift will impact the daily lives, financial inclusion, and economic stability of its citizens. 1.3. Research Objectives The primary research objective was to conduct a comprehensive analysis of the socioeconomic impact of Bitcoin adoption in El Salvador, examining its effects on financial inclusion, remittances, economic stability, and income distribution. To meet this research question, the researcher carefully developed three sub-objectives below: 1. Evaluate how the adoption of Bitcoin in El Salvador has impacted economic inclusivity 2. Evaluate the impact of Bitcoin on remittances 3. Analyse the impact of Bitcoin adoption on income distribution in El Salvador 1.4. Hypothesis Development The hypotheses were developed by analyzing the background information, indicating that high-income individuals may have benefited more from Bitcoin adoption in El Salvador due to early adoption and incentives. Conversely, low-income populations may not have experienced significant social advantages, given the cryptocurrency's volatility and concerns about income distribution. Based on these insights, the study’s H1 and H2 were: H1: The introduction of Bitcoin as a legal tender in El Salvador has caused more economic benefits to people with high incomes. H2: The introduction of Bitcoin as a legal tender in El Salvador has not produced social advantages for the population with low income

2. Literature Review 2.1. Theoretical and Conceptual Framework This research is strategically positioned at the dynamic intersection of technological innovation, economic policy, and social change. It is imperative to understand that the adoption of Bitcoin extends far beyond mere economic transactional use; it encompasses a profound transformation in the way people conduct their daily lives in El Salvador. This transition is the result of the acceptance of Bitcoin as legal money, which has been endorsed and interwoven into the fabric of Salvadorans' daily lives. In effect, Bitcoin's acceptance as legal currency marks a watershed moment in the conventional monetary landscape, with the government accepting it as a valid way of settling financial transactions and debts within the country's unique jurisdiction. According to Sono (2003, p. 3), legal tender is a special sort of money that differs from conventional fiat currencies that are issued and controlled by governments in that the government plays a crucial role in recognizing it. Furthermore, the study delves into the complicated idea of socioeconomic repercussions, a word that can take on several connotations depending on the circumstances. As Pelák and Korytáová (2021, p. 1) demonstrate, socioeconomic repercussions involve a range of changes that extend beyond the areas of pure economics. Changes in a community's identity, cultural customs, language, and demography, as well as significant changes in its economic basis, core industries, employment patterns, and infrastructure, are examples of these changes. This comprehensive view on socioeconomic repercussions is critical since it broadens the scope of the inquiry beyond monetary issues.

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Figure 3: Conceptual framework (Author, 2023) In line with the multifaceted nature of socioeconomic impacts, this research endeavors to delve deeper and unveil the comprehensive consequences of Bitcoin adoption, surpassing the boundaries of financial transactions. It aims to assess the impact of Bitcoin adoption on inclusivity, remittances, economic stability, and the distribution of wealth in El Salvador, painting a comprehensive picture of how this transformative innovation has reshaped the lives of its citizens. To elucidate and contextualize these concepts effectively, the research draws upon the Innovation Diffusion Theory, a robust theoretical framework that focuses on the diffusion of innovations within a society. As articulated by Dearing and Cox (2018, p. 184), this theory posits that new ideas, products, or technologies disseminate and gain acceptance among individuals, organizations, or societies over time. By applying the principles of the Innovation Diffusion Theory to the adoption of Bitcoin, this research gains insights into the various stages of Bitcoin integration in El Salvador. This analytical framework illuminates how the Salvadoran population, businesses, and policymakers are embracing this innovative financial paradigm. Moreover, the

application of the Innovation Diffusion Theory enables the researcher to discern the influential factors shaping Bitcoin adoption and to formulate educated predictions regarding the future trajectory of mass Bitcoin adoption within the nation. In doing so, it provides a robust analytical foundation for understanding the dynamic interplay between technological innovation, economic policy, and the profound societal changes catalyzed by Bitcoin's integration into the everyday lives of Salvadorans. This analytical approach equips the research to comprehensively explore the multifaceted impact of Bitcoin adoption in El Salvador. 2.2. Review of Relevant Literature While much attention has been directed toward the negative aspects of cryptocurrency, including volatility and illicit activities, this literature review explores the emerging narrative that highlights the potential socio-economic benefits of cryptocurrency adoption in developing nations, focusing on El Salvador. 2.2.1. Harmful Misuse of Cryptocurrency The discourse surrounding cryptocurrency in both popular media and academic circles primarily revolves around three key aspects: volatility, use case, and intrinsic value. its adoption and perceived value are frequently bound to the crypto local area itself. The worth of different digital forms of money relies on individuals' confidence in their inherent worth, which contributes fundamentally to the unpredictability seen in the crypto market (Gajdek & Kozak, 2019, p. 34). This unpredictability, thus, raises worries among specific financial investors regarding the long-term adoption of cryptocurrency and its viability as a legitimate currency. Moreover, security breaches are one more disturbing issue inside the crypto circle. Occurrences of digital money robbery have happened, with programmers effectively taking advantage of weaknesses in wallets to appropriate crypto resources. These security breaches serve as a source

of anxiety for those involved in the cryptocurrency space, adding another layer of complexity to the ongoing discourse. Cryptocurrencies, especially Bitcoin, have raised worries because of their relationship with unlawful exercises, making a nexus between digital money and criminal undertakings (Clark et al., 2022, par. 1). Bitcoin has acquired far-reaching use as a mechanism of trade in the dark web, offering a mix of speed, dependability, and untraceability, making it an attractive choice for illicit transactions. These unlawful exercises incorporate a wide range, including the unlawful exchange of medications, weapons, private data, illegal exploitation, and murder-for- hire plans (Clark et al., 2022, par. 4-5). Corruption, too, becomes a prevalent issue when cryptocurrencies are used for illicit gains and bribery. The association between cryptocurrencies and illicit activities has wide-ranging social implications, affecting public safety, trust, law enforcement, public perception, regulatory responses, and international cooperation. While Bitcoin is often seen as a way to promote financial inclusion and reduce inequality by bypassing traditional banking systems, its impact on economic inequality is complex. On one hand, Bitcoin can provide opportunities for those living in countries with limited access to financial services, Sai et al. (2021, p. 2) argues that it can also exacerbate inequality due to its volatile nature, high transaction fees, and the concentration of wealth among early adopters. In El Salvador, after the introduction of the Bitcoin law, around half of the nation's households initially downloaded the associated app. However, since the beginning of 2022, there has been a decline in new downloads, with more than 60 percent of early users not engaging in any transactions, while a specific group of educated, young, male individuals actively use the app, although they were not the primary target audience (Belsie, 2022). Building on this insight, Innovation

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Adoption Theory can be used to highlight how different adopter groups engage with the technology at different rates, with implications for their socioeconomic well-being. 2.2.2. Transformative Potential of Bitcoin The transformative potential of cryptocurrency adoption, particularly in developing nations, cannot be understated. Cryptocurrencies like Bitcoin offer viable solutions to financial challenges faced by vulnerable populations, with a significant focus on the positive impact in the realm of remittances. For individuals working abroad who need to send money back home, Bitcoin provides a cost-effective and accessible means of transferring funds, reducing reliance on expensive remittance services and overcoming currency exchange hurdles (Yao et al., 2021, p. 2). Perhaps the most ideal case example is Venezuela. In Venezuela, where hyperinflation and economic turmoil have rendered the national currency nearly worthless, Bitcoin has emerged as a transformative solution. As per Flows (2017, p. 1), Venezuelan bolivar's drastic cheapening has left many without essential necessities allowing Bitcoin to become a reasonable option. Its recession-proof nature allows Venezuelans to send and receive Bitcoin without the need for a traditional bank account, using only an internet connection, which is accessible to many through mobile phones. This accessibility empowers aid ventures and citizens to purchase merchandise with Bitcoin. Numerous organizations in Venezuela are solely accepting Bitcoin because of the bolivar's unpredictability (Flows, 2017, p. 3). Furthermore, Bitcoin's decentralised nature forestalls government control, making it a more steady choice for countries in financial disarray. As Bitcoin acquires acknowledgment around the world, it offers solid elective cash for residents in striving economies, like Nigeria, and may give way to monetary stability in emerging nations.

2.2.3. Cryptocurrency Regulations: The complex and multifaceted regulatory landscape surrounding cryptocurrencies is an indispensable and transformative factor significantly influencing their adoption and socio- economic impact, both within the borders of El Salvador and across the international stage. These intricate regulatory frameworks serve as linchpins, wielding substantial influence in molding the legitimacy, widespread acceptance, and fundamental stability of cryptocurrencies within the intricate tapestry of global economies. Varied nations have embarked on distinct regulatory paths, representing a spectrum that ranges from stringent bans, meticulous oversight, to nurturing an environment fostering technological innovation. For example, China has taken a notably strict approach, instituting a ban on cryptocurrency trading and initial coin offerings (ICOs) while scrutinizing cryptocurrency-related activities with precision (John et al., 2021, par. 2). Conversely, Switzerland has become a beacon of cryptocurrency innovation, nurturing a conducive environment for blockchain technology and digital currencies to flourish. A striking exemplar of pioneering regulation is found in El Salvador's ground-breaking move to embrace Bitcoin as legal tender, an audacious endeavor meticulously scrutinized by Belsie (2022, par. 1). This momentous leap has ignited a spectrum of responses, ranging from fervent support for financial inclusion, to resounding concerns regarding potential risks, thus underscoring the intricate and multifaceted nature of regulatory determinations in the realm of cryptocurrencies. 2.2.4. Income Distribution and Wealth Inequality The incorporation of Bitcoin as legal tender carries substantial ramifications for income distribution and wealth inequality, marking a pivotal juncture in the economic landscape. Recent empirical analyses, exemplified by Drakopoulos et al. (2021, par. 8-10), have illuminated that Bitcoin's institutionalization can set in motion a complex wealth redistribution process,

potentially granting disproportionate benefits to early adopters and participants entrenched within the cryptocurrency sphere. The dynamics of income distribution, particularly within emerging economies, are intrinsically entwined with the democratization and adoption of cryptocurrencies. Nevertheless, these intricate dynamics transcend the confines of a one- dimensional analysis. The extent to which Bitcoin influences wealth inequality hinges on a constellation of variables, encompassing its intrinsic volatility, accessibility, and the precise configuration of government policies. A meticulous exploration of the intricate interplay between cryptocurrency adoption and the distribution of income becomes paramount, offering a profound understanding of the prospective economic transformations intrinsic to a nation like El Salvador. 2.2.5. Public Policy and Government Initiatives Public policy and government initiatives emerge as paramount determinants in shaping the multifaceted economic outcomes stemming from cryptocurrency adoption. A comprehensive grasp of how governments navigate the realm of cryptocurrencies proves instrumental in evaluating their impact on income distribution and wealth inequality. For instance, within the Salvadoran context, the government's proactive and distinctive endeavors to foster Bitcoin integration, as discussed by Perez-Obregon (2023, par. 2-4), exemplify a novel approach to public policy implementation. Government initiatives span an array of strategic measures, encompassing financial inclusion programs, regulatory frameworks, taxation policies, and strategies for diversifying the economic landscape. These multifarious facets exert considerable influence on the extent to which cryptocurrencies are embraced and utilized, subsequently yielding discernible consequences for the configuration of income distribution and wealth inequality. A comprehensive dissection of governmental actions and their resultant repercussions

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remains indispensable in achieving an in-depth comprehension of the intricate economic transformations that accompany the adoption of cryptocurrencies. 2.2.6. Economic Diversification The integration of Bitcoin as legal tender can serve as a catalyst for enhancing economic diversification, not solely in El Salvador but also in other nations that opt for cryptocurrency integration. This strategic incorporation of digital currencies into the formal economic framework, as illustrated by Adrian (2022, par. 29), holds the potential to diminish the reliance on conventional industries and revenue streams, thereby forging a pathway toward a more resilient, multifaceted economic terrain. Economic diversification, characterized by a deliberate expansion into varied economic sectors, aspires to nurture a more robust and well-rounded financial landscape. The extent to which the adoption of cryptocurrencies furthers this endeavor of economic diversification and its nuanced effects on income distribution unfolds as a riveting realm of inquiry, capable of bestowing invaluable insights into the prospective transformations within national economies. It becomes increasingly vital to probe the alignment of this diversification drive with government policies and to decipher its multifaceted implications for the broader socioeconomic fabric. 2.2.7. Social and Cultural Implications Cryptocurrency adoption is an intricate and multifaceted phenomenon that transcends mere technical and economic considerations. Indeed, it delves into profound social and cultural dimensions, intricately woven into the fabric of societies. Understanding the transformative potential of cryptocurrencies necessitates a keen appreciation of their integration into the social tapestry of diverse communities. Notably, the insightful studies conducted by Sagheer et al. (2022, par. 5) underscore the intrinsic connection between the adoption of cryptocurrencies and

the communities they serve . This highlights the pivotal role of community sentiment and cultural context in shaping the acceptance and embrace of digital currencies, revealing that their impact on culture and society extends far beyond the realm of financial gains. The profound influence of cryptocurrencies on culture and society extends beyond the economic aspects, encapsulating their inherent capacity to challenge and reshape traditional financial systems while empowering individuals. This transformative aspect has, in turn, given rise to the formation of distinctive crypto communities, each characterized by its unique subcultures, values, and collective ethos. An illustrative case of the cultural evolution driven by cryptocurrencies is the emergence of crypto art, the proliferation of non-fungible tokens (NFTs), and the advent of decentralized autonomous organizations (DAOs) (Chandra, 2022, par. 23). These developments vividly exemplify the broader cultural shifts and transformative impact associated with cryptocurrencies, demonstrating how they are not only altering financial landscapes but also redefining cultural and social paradigms in the digital age.. 2.2.8. Public Perceptions and Trust The public's perception of cryptocurrencies plays an absolutely pivotal and nuanced role in not only their initial adoption but also their continued usage. This multi-faceted aspect, as astutely observed by Fang et al. (2022, par. 8), underscores the intricate relationship between cryptocurrencies, illegal activities, and the intricate dynamics of trust and skepticism. A comprehensive understanding of how the public perceives digital currencies, with a keen focus on their perceived benefits and associated risks, stands as a cornerstone for effectively gauging their long-term acceptance and sustainability. Public trust in cryptocurrencies is a facet greatly influenced by a plethora of interconnected factors, including the crucial dimensions of security, regulatory oversight, and the foundational stability of the underlying technology. In particular,

the occurrence of security breaches, as rigorously highlighted by Fang et al. (2022, par. 16), has invariably sown seeds of doubt about the overall safety of both holding and conducting transactions in the realm of cryptocurrencies. Furthermore, the role of regulatory responses cannot be overstated, as individuals typically look to governments and relevant authorities as beacons of hope for consumer protection and legal recourse in the event of disputes or unforeseen challenges. Within this context, it is imperative to acknowledge the cryptocurrency industry's acute recognition of the monumental significance of building trust. This is achieved through an unwavering commitment to adhering to best practices, fortified security measures, and unimpeachable transparency. In a bid to augment trust levels among users and potential investors, the cryptocurrency industry has embarked on various groundbreaking initiatives, including the establishment of self-regulatory organizations and the formulation of comprehensive industry standards. These initiatives are underpinned by a shared vision to enhance trust in the realm of cryptocurrencies, ultimately facilitating a more favorable environment for adoption and fostering positive public perceptions. 2.2.9. Financial Inclusion One of the most promising and transformative aspects of cryptocurrency lies in its potential to substantially promote financial inclusion, effectively dismantling barriers to access and empowering individuals who have long been excluded from traditional banking systems. As underlined by Mhlanga (2023, par. 3), cryptocurrencies, such as Bitcoin, present a unique opportunity for those residing in underserved regions to gain access to essential financial services. Leveraging the power of blockchain technology, these individuals can seamlessly integrate themselves into the global economy without the prerequisites of a conventional bank account. Nevertheless, it's imperative to recognize that the impact on financial inclusion is

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multifaceted. While cryptocurrencies hold immense promise, their volatile nature and associated high transaction fees have the potential to impede their practicality, particularly for individuals with limited financial resources. Furthermore, the growing concentration of wealth among early cryptocurrency adopters, as underscored by Mhlanga (2023, par. 7), sparks valid concerns regarding the exacerbation of pre-existing economic disparities. The case of El Salvador, following the adoption of the Bitcoin Law, as comprehensively documented by Renteria and Esposito (2021, par. 10-14), offers a nuanced perspective wherein initial enthusiasm may not necessarily translate into widespread financial inclusion. This experience serves as a stark reminder of the critical need to address the distinct requirements and obstacles faced by various user groups. Consequently, incorporating these multifaceted dimensions into the analysis of the economic impact of Bitcoin adoption in El Salvador becomes imperative for fostering a comprehensive understanding of the cryptocurrency's profound influence on societal dynamics, the establishment of trust, and the realization of genuine financial inclusion. 3. Research Methodology 3.1. Research Design The research methodology for this study involved a mixed-method combining qualitative and quantitative methods. Quantitative analysis was conducted using secondary data sources, such as government statistics, financial reports, and cryptocurrency transaction data, to assess macroeconomic indicators, income distribution, and the adoption patterns of Bitcoin. Qualitative research was employed to gather primary data from Salvadoran citizens, policymakers, and cryptocurrency users to gain insights into their experiences, perceptions, and attitudes regarding Bitcoin adoption. The mixed-method facilitated an in-depth analysis and a view of the topic for robust conclusions and policy recommendations.

3.2. Sampling For the quantitative study, a purposeful sampling approach was used to ensure the secondary data sources provided in-depth information on the topic. The primary criteria was relevance to the topic, publication date (after 2021), credibility, and quality of data for high- quality and diverse perspectives on the topic. For the survey and focus group, the sample included individuals in El Salvador that have been affected by or have had direct interactions with Bitcoin as a legal tender. A stratified sampling was used to divide the population into strata based on income levels, regions within El Salvador, ensuring representation from different segments. The sample for the survey comprised 90 participants with 30 participants in each category of low, middle, and high-income segments. For the focus group, the sample contained 10 policymakers and experts in El Salvador. The participants were reached through collaboration with local NGO, Mi Primer,an educational organization focused on promoting Bitcoin adoption in El Salvador. 3.3. Data Collection Methods Quantitative data was collected using content analysis of secondary data sources, such as government statistics, financial reports, and cryptocurrency transaction data, to assess macroeconomic indicators, income distribution, and the adoption patterns of Bitcoin. Qualitative data was collected through semi-structured surveys and focus groups. Design structured online surveys were distributed to a large number of participants across El Salvador through social media channels, while the focus group was conducted online via Zoom. The Zoom meeting lasted for 90 minutes to allow collection of comprehensive data for the study. The audio was recorded and the researcher engaged in note-taking to capture the participants’ main points and emotions. The content analysis, survey, and focus group allowed the capture of relevant data

including income levels, financial habits, attitudes toward Bitcoin, and its perceived impact on their socioeconomic well-being. 3.4. Data Analysis and Interpretation Quantitative data, such as income levels and economic indicators, was subjected to rigorous statistical analysis and hypothesis testing. Qualitative data from surveys and focus groups was analysed using thematic analysis to identify recurring themes and insights on income distribution, financial inclusion, and attitudes towards cryptocurrency. The thematic analysis applied Clarkes and Braun’s (2013) six steps data analysis process including data familiarization, generating initial codes, searching for themes, reviewing themes, defining and naming themes, and writing the report, to systematically extract and interpret recurring patterns and themes within the qualitative data.

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4. References Adrian, T. (2022, April 20). New Framework for the Digital Economy . IMF. Retrieved October 27, 2023, from https://www.imf.org/en/News/Articles/2022/04/20/sp042022-new- framework-digital-economy Álvarez, F., Argente, D., & Van Patten, D. (2022). Are cryptocurrencies currencies? Bitcoin as legal tender in El Salvador . https://doi.org/10.3386/w29968 Belsie, L. (2022). El Salvador’s Experiment with Bitcoin as Legal Tender . NBER. Retrieved October 25, 2023, from https://www.nber.org/digest/202207/el-salvadors-experiment- bitcoin-legal-tender Burke, Q. J. (2022). The Great Bitcoin Experiment: A Social Analysis of Cryptocurrency in El Salvador . Colby College. Retrieved October 25, 2023, from https://digitalcommons.colby.edu/cgi/viewcontent.cgi? article=1567&context=seniorscholars Carmona, T. (2023, June 24). Debunking the narratives about cryptocurrency and financial inclusion | Brookings . Brookings. Retrieved October 25, 2023, from https://www.brookings.edu/articles/debunking-the-narratives-about-cryptocurrency-and- financial-inclusion/ Chandra, Y. (2022). Non-fungible token-enabled entrepreneurship: A conceptual framework. Journal of Business Venturing Insights , 18 , e00323. https://doi.org/10.1016/j.jbvi.2022.e00323 Clark, R., Krept, S., & Rao, A. (2022, March 7). Shifting crypto landscape threatens crime investigations and sanctions | Brookings . Brookings. Retrieved October 25, 2023, from

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https://www.brookings.edu/articles/shifting-crypto-landscape-threatens-crime- investigations-and-sanctions/ Dearing, J. W., & Cox, J. G. (2018). Diffusion Of Innovations Theory, Principles, And Practice. Health Affairs , 37 (2), 183–190. https://doi.org/10.1377/hlthaff.2017.1104 Drakopoulos, D., Natalucci, F., & Papageorgiou, E. (2021, October 1). Crypto Boom Poses New Challenges to Financial Stability . International Monetary Fund. Retrieved October 26, 2023, from https://www.imf.org/en/Blogs/Articles/2021/10/01/blog-gfsr-ch2-crypto-boom- poses-new-challenges-to-financial-stability Fang, F., Ventre, C., Basios, M., Kanthan, L., Martínez-Rego, D., Wu, F., & Li, L. (2022). Cryptocurrency trading: a comprehensive survey. Financial Innovation , 8 (1). https://doi.org/10.1186/s40854-021-00321-6 Flows, C. (2017, February 3). Why Venezuela’s Currency Crisis Is A Case Study For Bitcoin. Forbes . https://www.forbes.com/sites/realspin/2017/02/03/why-venezuelas-currency- crisis-is-a-case-study-for-bitcoin/?sh=3b1cffe19b29 Gaikwad, A., & Mavale, S. (2021). The impact of cryptocurrency adoption as a legal tender in El Salvador. International Journal of Engineering and Management Research , 11 (6). https://doi.org/10.31033/ijemr.11.6.16 Gajdek, S., & Kozak, S. (2019). Bitcoin as an electronic payment tool. Zeszyty Naukowe Uniwersytetu Przyrodniczo-Humanistycznego W Siedlcach , 47 (47), 33–39. https://doi.org/10.34739/zn.2019.47.04 John, A., Shen, S., & Wilson, T. (2021, September 27). China’s top regulators ban crypto trading and mining, sending bitcoin tumbling. Reuters .

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https://www.reuters.com/world/china/china-central-bank-vows-crackdown-cryptocurrency- trading-2021-09-24/ Pelčák, S., & Korytářová, J. (2021). Definition of Socio-Economic Impacts of Large-Scale Development Projects within Urban Development. IOP Conference Series , 1203 (2), 022091. https://doi.org/10.1088/1757-899x/1203/2/022091 Renteria, N., & Esposito, A. (2021, September 8). El Salvador’s world-first adoption of bitcoin endures bumpy first day. Reuters . https://www.reuters.com/business/finance/el-salvador- leads-world-into-cryptocurrency-bitcoin-legal-tender-2021-09-07/ Sagheer, N., Khan, K. I., Fahd, S., Mahmood, S., Rashid, T., & Jamil, H. (2022). Factors Affecting Adaptability of Cryptocurrency: An application of Technology acceptance model. Frontiers in Psychology , 13 . https://doi.org/10.3389/fpsyg.2022.903473 Sai, A. R., Buckley, J., & Gear, A. L. (2021). Characterizing wealth inequality in cryptocurrencies. Frontiers in Blockchain , 4 . https://doi.org/10.3389/fbloc.2021.730122 Sigalos, M. (2022, June 25). El Salvador’s $425 million bitcoin experiment isn’t saving the country’s finances. CNBC . https://www.cnbc.com/2022/06/25/el-salvador-bitcoin- experiment-not-saving-countrys-finances.html Sono, K. (2003). Current Developments in Monetary and Financial Law, Vol. 2. In International Monetary Fund eBooks (Vol. 2). International Monetary Fund. https://doi.org/10.5089/9781589061767.072 Taskinsoy, J. (2021). Bitcoin: a new digital gold standard in the 21st century? Social Science Research Network . https://doi.org/10.2139/ssrn.3941857

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The Global Economy. (2022). El Salvador Percent people with bank accounts - data, chart | TheGlobalEconomy.com . TheGlobalEconomy.com. Retrieved October 25, 2023, from https://www.theglobaleconomy.com/El-Salvador/percent_people_bank_accounts/ Yao, Y., Li, X., Zhang, D., & Wang, S. (2021). How cryptocurrency affects economy? A network analysis using bibliometric methods. International Review of Financial Analysis , 77 , 101869. https://doi.org/10.1016/j.irfa.2021.101869

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