JPMorgan questions Bitcoin’s use as a payments instrument in El Salvador

JPMorgan analysts cited low liquidity, Bitcoin volatility, and the risk of converting into U.S. dollars as the main constraints on using the digital gold in El Salvador. This was reported by Bloomberg.

According to the report, problems may arise because the majority of Bitcoins are illiquid.

“More than 90% have not changed hands over the past year, and a significant and growing share goes to wallets with low turnover,” the analysts said.

In their view, daily payment activity in El Salvador accounts for about 4% of the network’s transaction volume. The share of total on-chain value transferred barely exceeded 1%, the report says.

Analysts noted the risks of “Cannibalization of dollar liquidity”, as well as the danger to the balance of payments and fiscal stability after the prospect of converting Bitcoin into the U.S. dollar appeared.

On June 9, the Legislative Assembly of El Salvador passed a bill to recognise the first cryptocurrency as an official means of payment in the country.

The International Monetary Fund saw risks in the legalization of Bitcoin payments, and the World Bank refused to assist El Salvador with the rollout of digital gold.

Earlier, JPMorgan questioned the benefits of Bitcoin for the country’s economy.

A recent poll of Salvadorans showed that 46% of respondents know nothing about the first cryptocurrency.

Subscribe to ForkLog news on VK!