According to analysts at the US investment bank JP Morgan, Bitcoin is not suitable as official currency. It has its limits, including the high level of risk associated with the volatility of the value of this cryptocurrency.
JP Morgan mainly encounters Salvador, which introduced Bitcoin as legal tender in early June. According to analysts at the US bank, the Salvadoran economy may face the inconvenience of Bitcoin as a legal or official currency.
Among the main ones is, for example, the relatively low liquidity of Bitcoin in El Salvador. “This may represent significant limits for Bitcoin as a transaction tool,” the bank said. He sees further limitations on the use of Bitcoin for payments in the volatility of its value and the instability of demand for Bitcoin compared to demand for US dollars.
According to JP Morgan analysts, Bitcoin can cannibalize the dollar as a means of sending remittances from Salvadoran citizens working abroad, which in turn can increase the riskiness of El Salvador’s balance of payments structure and fiscal stability.