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According to JP Morgan, El Salvador’s decision to accept Bitcoin as legal cash would have little economic impact.
JPMorgan is the most recent source to comment to El Salvador’s decision to accept Bitcoin (BTC) as legal tender.
In a client note tweeted by @DocumentingBTC, the United States banking giant stated that there was little economic benefit to El Salvador adopting BTC as a parallel legal tender to the U.S. dollar.
JP Morgan on El Salvador adopting #Bitcoin
Notice the last line… pic.twitter.com/5hl0kR9WB0
— Documenting Bitcoin 📄 (@DocumentingBTC) June 11, 2021
El Salvador’s parliament passed a historic measure recognising Bitcoin as legal cash on Thursday. The “Bitcoin Law” measure was approved by an overwhelming majority of 62 votes out of 84 cast.
The JPMorgan client letter noted in response to the move:
“As with the dollarization in the early-2000s, this move does not seem motivated by stability concerns, but rather is growth-oriented […] But it is difficult to see any tangible economic benefits associated with adopting Bitcoin as a second form of legal tender, and it may imperil negotiations with the IMF.”
El Salvador, which faces a possible $3.2 billion budget shortfall in 2021, is allegedly in discussion with the International Monetary Fund over a $1 billion finance package.
Given the IMF’s role in facilitating access to external funding for countries such as El Salvador, JPMorgan’s remarks match similar thoughts expressed by other market experts over the possible ramifications of the BTC adoption decision.
Indeed, the IMF has expressed concern about the move, warning that El Salvador’s adoption of Bitcoin as legal cash would have substantial legal and financial repercussions.
Earlier on Friday, Benoît Curé, the head of the Bank for International Settlements’ innovation unit, described El Salvador’s moves as a “interesting experiment.” Curé, a well-known Bitcoin opponent, previously referred to Bitcoin as the “evil spawn” of the 2008 global financial crisis.
Meanwhile, the Basel Committee on Banking Supervision categorised Bitcoin as high risk on Thursday, requiring banks to keep $1 capital for every $1 worth of Bitcoin kept in custody.