JPMorgan is the latest source to respond to El Salvador’s decision to adopt Bitcoin (BTC) as legal tender in the country.
In a customer note tweeted By @DocumentingBTC, the US banking giant said there was little economic benefit to El Salvador from adopting BTC as legal tender alongside the US dollar.
JP Morgan on adoption from El Salvador #Bitcoin
Notice the last line … pic.twitter.com/5hl0kR9WB0
– Document Bitcoin (@DocumentingBTC) June 11, 2021
On Thursday, the Salvadoran parliament passed a landmark bill recognizing Bitcoin as legal tender. The Bill “Bitcoin Law” was passed by an overwhelming majority of 62 out of 84 votes.
Commenting on the move, JPMorgan’s customer note stated:
“As with the dollarization of the early 2000s, this movement does not seem motivated by stability problems, but rather oriented towards growth. […] But it’s hard to see any tangible economic benefits associated with adopting Bitcoin as a second form of legal tender, and it may jeopardize negotiations with the IMF. “
Faced with a potential budget deficit of $ 3.2 billion in 2021, El Salvador is reportedly in talks with the International Monetary Fund for a funding package of $ 1 billion.
Given the IMF’s role in accessing external credit for countries like El Salvador, JPMorgan’s comments echo similar sentiments expressed by other market commentators about the potential implications of adopting BTC.
Indeed, the IMF itself has raised questions about development by stating that El Salvador adopting Bitcoin as legal tender has significant legal and financial ramifications.
Related: IMF Plans To Meet With President Of El Salvador, To Potentially Discuss Bitcoin Adoption
Earlier on Friday, Benoît Cœuré, head of the innovation hub of the Bank for International Settlements, called El Salvador’s actions “an interesting experience”. Coeuré, a well-known Bitcoin critic, once called BTC a “false evil” of the 2008 global financial crisis.
Meanwhile, on Thursday, the Basel Committee on Banking Supervision ranked Bitcoin in its highest risk category, advising banks to hold $ 1 in capital for every dollar of Bitcoin held in custody.