JPMorgan Chase continues to criticize El Salvador’s announcement of Bitcoin (Bitcoin) As a legal currency, it warns of the potential risks of the country and cryptocurrency.
A report issued by a JPMorgan Chase expert group led by economist Steve Palacio indicated that El Salvador’s adoption of BTC as legal currency may put pressure on the Bitcoin network, Bloomberg Report on Sunday.
Experts said that Bitcoin’s liquidity is extremely low, and pointed out that most Bitcoin trading volume has been internalized by major exchanges, and more than 90% of Bitcoins have not changed hands in more than a year.
JPMorgan Chase experts pointed out that the use of Bitcoin as legal tender in a country like El Salvador may “seriously limit” Bitcoin’s ability as a medium of exchange, and pointed out the liquidity and transaction nature of cryptocurrencies.
They said: “El Salvador’s daily payment activities will account for 4% of recent on-chain transactions and more than 1% of the total value of tokens transferred between wallets in the past year.”
JPMorgan Chase experts also pointed to other challenges associated with El Salvador’s adoption of Bitcoin as legal tender, including the potential impact of official dollarization on the monetary system. The report added that the continued imbalance in demand for exchange between Bitcoin and U.S. dollars may “cannibalize the liquidity of onshore U.S. dollars” and eventually introduce fiscal and balance of payments risks.
related: UN Commission issues new warning on El Salvador’s adoption of BTC
As mentioned earlier, the Salvadoran Parliament Pass a bill to recognize Bitcoin As the legal tender in early June, President Nayib Bukele stated that all businesses must accept Bitcoin.Some global financial regulators and institutions expressed doubts about this move. The International Monetary Fund warned Potential legal and financial consequences. JPMorgan Chase analyst advises El Salvador to adopt Bitcoin May jeopardize the IMF negotiations.