JPMorgan’s opinion on bitcoinization in El Salvador
JPMorgan investment bank published a report Friday titled “Bitcoinization of El Salvador”. The country’s congress passed the bitcoin legal tender bill on Wednesday, becoming the first nation to do so.
JPMorgan described: “El Salvador recently passed a law making bitcoin legal tender and will attempt to implement a two-currency system with the US dollar as the main unit of account, but requiring bitcoin to be accepted as payment for all economic activity. “
The investment bank added that “As with dollarization in the early 2000s, this decision does not appear to be motivated by stability issues, but rather geared towards growth,” adding:
It’s hard to see tangible economic benefits associated with adopting bitcoin as a second form of legal tender, and it could jeopardize negotiations with the IMF.
The International Monetary Fund (IMF) has previously raised concerns over El Salvador’s decision to make bitcoin legal tender, citing legal and economic issues. El Salvador is currently seeking a billion dollar loan from the IMF.
An official from the Bank for International Settlements (BIS) also expressed doubts about Salvadoran bitcoin law, calling it an “interesting experiment”, but stressing that the BIS does not see that bitcoin can work as a means of payment. .
The JPMorgan report further points out that there are questions as to how bitcoin will be treated by major economies when it becomes legal tender in El Salvador. The bank warned that any change in treatment “would arguably be an unintended consequence of laws and regulations that are considerably older and naturally did not anticipate cryptocurrency.” Nonetheless, the bank said:
These movements can be complicated if it is the start of a larger trend among nations that are smaller and in the same situation.
After El Salvador passed the bill to make bitcoin legal tender, President Nayib Bukele said the country would mine BTC using energy from volcanoes. He said it would be “very cheap, 100% clean, 100% renewable, zero energy emissions from our volcanoes”.
Do you think other countries will follow El Salvador’s lead and make bitcoin legal tender? Let us know in the comments section below.
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