- JP Morgan bank pen problems El Salvador will encounter after Bitcoin law
- IMF denies El Salvador support after making Bitcoin legal tender
- High Bitcoin volatility will be a problem for El Salvador
Top American financial institution JP Morgan has highlighted some problems El Salvador will encounter after passing its Bitcoin law and adopting the digital asset.
The banking giants noted that the Bitcoin law would undoubtedly pose a challenge for Bitcoin as an entity and the Central American country.
JP Morgan analysts, in their analysis, pointed that Bitcoin’s daily trading volume hits anywhere between $40 to $50 billion. However, the amount has been internalized by crypto exchange firms through which the coin moves around. They also noted that a large part of Bitcoin remains liquid as over 90 percent does not change hand in a year. This poses a problem of scarcity for the country that just made the digital asset a legal tender.
Other problems JP Morgan highlights after El Salvador Bitcoin law
Other key concerns raised by the banking giant are growing skepticism, and resistance Salvadorians have to use Bitcoin as a means of exchange. Cryptopolitan has previously reported how a survey shows that many residents are not ready for Bitcoin.
JP Morgan also noted that the high volatility of crypto would be a major challenge for the country’s monetary-financial system and the U.S dollar.
Lastly, the American banknotes that an imbalance in demand for the Bitcoin/USD conversions can “cannibalize onshore dollar liquidity,” says JPMorgan. Thus, this can eventually result in fiscal and balance of payment risks.
Crisis follows after El Salvador makes Bitcoin legal tender
Aside from concerns JP Morgan raised recently over the Bitcoin law passed by El Salvador, there has been a number crisis that has rocked the nation after the country adopted Bitcoin as a currency.
One of it is from the International Monetary Fund, IMF. The IMF raised concerns over the move while the World Bank has denied any technical assistance in implementing Bitcoin.
Similarly, there has been furor by political opposition in the country over the move, which made President Nayib Bukele appear in a national broadcast to quell tension raised by political opponents.
The recent Bitcoin adoption comes in the wake of the economic downturn faced by El Salvador.