The investment bank, JPMorgan does not seem to buy the bitcoinisation move from El Salvador and believes that it is difficult to see any tangible economic benefits associated with adopting bitcoin as a second form of legal tender.
JPMorgan pointed that the country’s move to make bitcoin a legal tender may stir up the interest of similar smaller nations towards bitcoin adoption as a legal tender.
JPMorgan’s Comment on El Salvador’s Bitcoinisation
A popular investment bank, JPMorgan, in a recent report which was released on Friday titled “The Bitcoinisation of El Salvador.” The country’s congress passed the bill making bitcoin legal tender on Wednesday, becoming the first nation to do so.
JPMorgan stated:
“El Salvador recently passed legislation making bitcoin legal tender, and will attempt to implement a bimonetary system with the U.S. dollar as the primary unit of account but mandating bitcoin be accepted as payment for all economic activity.”
The investment bank also mentioned in its statement that
“As with dollarization in the early-2000s, this move does not seem motivated by stability concerns, but rather is growth-oriented,”
further expressing that:
It is difficult to see any tangible economic benefits relating to bitcoin adoption as a second form of legal tender, and it may endanger financial negotiations with the IMF.
The International Monetary Fund (IMF) has already voiced concerns regarding El Salvador’s move to make bitcoin legal tender, citing legal and economic issues. El Salvador is currently seeking a billion-dollar loan from the IMF.
The Bank of International Settlements (BIS) in a recent statement also expressed doubt in El Salvador’s bitcoin law, calling it an “interesting experiment,” but emphasizing that the BIS does not see that bitcoin can function as a means of payment.
The JPMorgan report further points out that there are questions as to how bitcoin will be treated by larger economies when it is legal tender in El Salvador. The bank warned that any treatment changes “would arguably be an unintended consequence of laws and regulations that significantly predate, and understandably did not anticipate cryptocurrency.” Nonetheless, the bank said:
Those moves may be complicated if this is the beginning of a broader trend among similarly situated, smaller nations.
After bitcoin was passed as a legal tender, El Salvador President Nayib Bukele said the country will start mining BTC using energy from volcanoes. He said it will be
“very cheap, 100% clean, 100% renewable, 0 emissions energy from our volcanos.”
