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JPMorgan hopes El Salvador will not adopt Bitcoin as legal currency

JPMorgan hopes El Salvador will not adopt Bitcoin as legal currency

can drive El Salvador announces Bitcoin as legal tender This creates challenges for both the state and cryptocurrencies, according to a team of analysts at investment banks JPMorgan, who attributed the reason for questioning the ability to implement those plans, to the fact that bitcoin trading volumes generally exceed $ 40 billion to $ 50 billion per day. But most of the exchanges are taking place, absorbed through the main exchanges.

They added that a large chunk of Bitcoin is locked in illiquid entities, with more than 90% of its holdings not circulating in more than a year, as “a large and growing portion of wallets have low turnover,” according to Bloomberg, which reviewed Item. Al “.

“Daily payment activity in El Salvador will account for approximately 4% of the volume of recent transactions on the Bitcoin blockchain, and more than 1% of the total value of the cryptocurrency transferred between wallets last year,” the report said. nature of the scale, they are likely to constitute a significant limitation on its potential as a medium of exchange. “

El Salvador’s President Najib Boukela’s initiative to turn Bitcoin into an official currency in the country has sparked a debate about whether it is beneficial and about the possible repercussions.

Bukele argued that Bitcoin would help increase financial inclusion, raise El Salvador’s low bank penetration rate, and lower the cost of sending remittances. But the International Monetary Fund, which is now in talks with El Salvador about its credit program, is among those who have questioned this logic.

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Even many of the proponents of Bitcoin say that while there is an argument that it is a good store of value, its usefulness as a payment mechanism is limited.

In turn, Stablecoin Tethe co-founder William Quigley said: “Bitcoin is the worst payment system ever invented.” “Almost any token is better than Bitcoin as a payment system,” he added.

Other challenges seen by JPMorgan regarding the legalization of Bitcoin in El Salvador include what recent polls indicate about widespread skepticism and a reluctance to use Bitcoin as a medium of exchange.

Bitcoin’s high volatility is also a particularly big challenge in a monetary system alongside official dollarization.