American banking giant JPMorgan continued to criticize El Salvador’s declaration of Bitcoin (BTC) as legal tender, warning of potential risks to both the country and the cryptocurrency.
A team of JPMorgan experts led by economist Steve Palacio has released a report suggesting that El Salvador’s adoption of BTC as legal tender could put a strain on the Bitcoin network, Bloomberg reported on Sunday.
Experts say Bitcoin is very liquid and note that most of the Bitcoin trading volume is internalized by major exchanges, with over 90% of Bitcoin not changing hands in more than a year.
JPMorgan experts noted that the use of Bitcoin as legal tender in a country like El Salvador would potentially cause a “significant limitation” on Bitcoin’s ability to act as a medium of exchange, indicating the cryptocurrency’s transactional and illiquid nature.
“Daily settlement activity in El Salvador will represent 4% of the most recent transaction volume in the chain and over 1% of the total value of tokens transferred between wallets over the past year,” they said.
JPMorgan experts also noted other challenges associated with El Salvador’s adoption of Bitcoin as legal tender, including the potential impact on the monetary system along with official dollarization. The report added that the persistent imbalance in demand for bitcoin and US dollar conversions could “eat up the liquidity of the domestic dollar” and ultimately lead to financial and balance of payments risk.
Connected: UN Commission issues new warning about the introduction of BTC in El Salvador
As previously reported, El Salvador’s Congress passed a bill to recognize Bitcoin as legal tender in early June, with President Nayib Bukele declaring that accepting Bitcoin will be mandatory for all businesses. Some global regulators and financial institutions have been skeptical of the move, with the International Monetary Fund warning of possible legal and financial ramifications. JPMorgan analysts suspect that El Salvador’s introduction of Bitcoin could jeopardize IMF negotiations.
.
.
Discover why Qubetics, NEAR Protocol, and Immutable X are the best altcoins to join today,…
BTFD Coin is offering a chance to relive the glory days of meme coin investing,…
Explore key takeaways from BlockDAG’s AMA, showcasing strides in scalability, growth of the ecosystem, and…
Discover why Qubetics, Polkadot, and Cosmos are the best cryptos with 1000X potential, offering innovation,…
Explore the best coins to buy in December 2024—Qubetics with its thrilling presale, Polkadot’s interoperability,…
The Crypto Market Outlook 2025 highlights key areas: stablecoin growth, tokenization, crypto ETFs, DeFi innovation,…
This website uses cookies.