JPMorgan “struggles to see any tangible economic benefit associated with the adoption of bitcoin as another form of legal tender.” Commenting on El Salvador’s bitcoinization, JP Morgan did not rule out that the country’s move to make the cryptocurrency legal tender could be “the start of a broader trend among equally situated, smaller countries”.
JPMorgan’s Opinion on Bitcoinization in El Salvador
JPMorgan described: “El Salvador recently passed legislation to make bitcoin legal tender, and will attempt to implement a bipartisan system with the US dollar as the primary unit of account, but not bitcoin. Must be accepted as payment for all economic activities.”
The investment bank said that “as with dollarization in the early 2000s, this move is not driven by sustainability concerns, but rather growth-oriented,” elaborating:
It is difficult to see any tangible economic benefits associated with the adoption of bitcoin as another form of legal tender, and it could jeopardize negotiations with the IMF.
The International Monetary Fund (IMF) has already raised concern Regarding El Salvador’s move to make bitcoin legal tender, citing legal and economic issues. El Salvador is currently seeking a $1 billion loan from the IMF.
An official from the Bank of International Settlements (BIS) has also expressed skepticism about El Salvador’s bitcoin law, calling it “interesting experiment”, but emphasizing that the BIS does not see that bitcoin can act as a means of payment.
The JP Morgan report further points out that there are questions about how bitcoin will be treated by large economies if it becomes legal tender in El Salvador. The bank warned that any treatment change would “arguably be an unintended consequence of laws and regulations that have been in place long enough, and understandably, cryptocurrencies were not expected.” However, the bank said:
Those moves can be complicated if it is just the beginning of a broader trend among equally located, smaller nations.
After El Salvador passed a bill to make bitcoin legal tender, President Nayib Bukele said the country would be mining B T c using the energy from volcanoes. He said it would be “very cheap, 100% clean, 100% renewable, 0 emissions energy from our volcanoes”.
Do you think other countries will follow El Salvador’s example and make bitcoin legal tender? Let us know in the comments section below.
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