Debate over pressure on Bitcoin to become legal tender for the President of El Salvador continues as bank JPMorgan warns of potential risks associated with the country’s cryptocurrency adoption.

JPMorgan experts released a report last week on a number of challenges in implementing the new Bitcoin law, mainly its illiquidity and high volatility.

Pressure on the Bitcoin network

According to a report by JPMorgan experts, El Salvador’s adoption of Bitcoin as legal tender could put significant pressure on the Bitcoin network.

“Bitcoin trading volumes typically exceed $ 40 to 50 billion a day, but most of it is internalized by major exchanges. Large amounts of Bitcoin are locked in illiquid units and over 90% of them have not been transferred for more than a year. “

“Daily settlement activity in El Salvador is expected to represent around 4% of the most recent transaction volume in the chain and over 1% of the total value transferred between wallets over the past year.”

Due to the liquidity and transactional nature of Bitcoin as such, its launch in El Salvador could severely limit its ability to serve as a medium of exchange, the report said.

Pressure on El Salvador

The JPMorgan report also points to concerns about the impact of the high volatility of cryptocurrencies in the monetary system along with official dollarization, adding that a permanent imbalance in demand for Bitcoin – the conversion of US dollars on a government platform “is draining liquidity could”. of the domestic dollar ”and involve financial and balance of payments risks.

JPMorgan’s report also echoes recent polls showing El Salvador’s skepticism about Bitcoin as a medium of exchange as it adds public concern to the list of application challenges.

Mr. Teacher

According to Cryptoslate

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