According to JPMorgan analysts, the use of BTC in the economy of El Salvador is facing obstacles, which indicates possible “restrictions” on the use of the cryptoasset as a means of payment.
The problem with using bitcoin as a means of payment in El Salvador is that most of the coins in circulation have not changed hands for over a year. Analysts at JPMorgan note daily payments activity in the country, which accounts for about 4% of the volume of recent transactions on the network and more than 1% of the total volume of coins that have been transferred between wallets in the past twelve months.
This situation may indicate “significant restrictions on the potential of bitcoin as a means of payment,” said researchers at JPMorgan. Analysts also mentioned the results of a recent poll, according to which the majority of Salvadorans consider the new law “completely wrong”. At the same time, 46% of respondents said that they have no idea what bitcoin is.
In addition to the illiquidity of the asset, the biggest concerns are related to the volatility of Bitcoin and the imbalance in demand for BTC against the US dollar. Analysts at JPMorgan said the conversions on the government platform could potentially “create problems for dollar liquidity domestically,” resulting in balance of payments and financial stability risks.
Recall that bitcoin was recognized as legal tender in El Salvador in early June. However, many global financial institutions and regulators opposed this initiative. Thus, the World Bank refused to help the country integrate cryptocurrency into the financial system.
Recently, Fitch Ratings researchers said that the initiative to introduce bitcoin as a means of payment in El Salvador will increase financial, operational and regulatory risks for banks.
