JPMorgan Analysts Question Bitcoin’s Benefits for El Salvador’s Economy

El Salvador’s as legal tender recognition of Bitcoin does not bring the state notable economic benefits, according to JPMorgan analysts. The statement was published in a new investor note dated June 11.

JP Morgan on El Salvador adopting #Bitcoin

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— Documenting Bitcoin 📄 (@DocumentingBTC) June 11, 2021

Analysts stressed that such a move could jeopardize negotiations with the International Monetary Fund (IMF). On June 11, IMF spokesperson Gerry Rice said that Bitcoin legalization carries risks and regulatory challenges.

“Just as in the case of dollarisation in the early 2000s, this step does not appear to be driven by concerns about stability. It is more oriented toward growth. However, it is difficult to see any tangible benefits for the economy from adopting Bitcoin as a second form of legal tender,” JPMorgan analysts said.

The bank’s specialists said the more important question is the implications for large economies, including their tax, banking, and financial regulation.

“These measures could be complicated if this is the start of a broad trend among small states in similar circumstances,” the analysts added.

Benoît Cœuré, head of BIS’s innovation hub, called the legalization of Bitcoin payments in El Salvador “an interesting experiment,” according to Reuters.

“We do not believe Bitcoin has passed the test as a means of payment. Bitcoin is a speculative asset that should be regulated accordingly,” the BIS senior manager explained.

ForkLog experts said the precedent set by El Salvador could equally attract investment inflows as well as capital outflows.

Earlier, President Nayib Bukele proposed to mine the first cryptocurrency with volcanic energy.

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