Possible Limitations to Use Bitcoin as Legal Tender in El Salvador?

7:34 am, Mon, 12 July 21

The world witnessed a historic moment when El Salvador adopted the largest crypto asset as a legal tender. Since then the Central American country has made headlines many times, thanks to announcements such as:

  • Construction of volcano-power BTC mining facility
  • Installation of 1500 BTC ATMs in the country
  • Allocation of free BTC to the citizens (only users of Chivo)

However, despite President Bukele’s efforts, could there be limitations to use BTC as legal tender? JP Morgan seems to think so as the investment banking company has highlighted a few points.

The adoption of BTC by El Salvador has significantly highlighted its importance and potential as a legal tender across the world. The growth potential and value this means of payment brings to the El Salvador economy are unsurmountable.

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What is JP Morgan’s Assessment?

The flagship digital asset is currently trading at $34,313 (at the time of writing). It is being recognized in more countries and embraced by several banks after El Salvador’s adoption. This is why many anticipate an even better situation for BTC, once the adoption bill takes effect in the country.

However, the global investment bank, JP Morgan seems to think otherwise.

According to JP Morgan, the use of Bitcoin as a medium of exchange may not be as smooth as expected. A few problems might emerge, which can be tough for El Salvador’s economy.

Here are some reasons why JP Morgan has come to this conclusion:

  • A good quantity of BTC is bound in illiquid entities.
  • According to a recent survey, 46% of Salvadorans are unaware of what Bitcoin is.
  • A majority of citizens perceive the law to be “not all correct”.
  • The biggest factor that can potentially cause a problem is BTC’s volatility.
  • The demand for BTC to U.S. dollar is also not balanced.

What Can BTC Investors Expect?

Bitcoin is the largest cryptocurrency in the world, which is believed to be a better investment than gold by many. Bitcoin caught the eye of even more countries and companies after it was adopted as a legal tender in El Salvador.

According to the bill proposed by Salvadoran President Nayib Bukele:

  • Prices will be expressed in Bitcoin
  • Economic agents will accept Bitcoin as payment
  • Tax contributions will be paid in Bitcoin

These are only some of the points in the proposed bill, which will take effect on September 7th.

However, given the stance of opposition, the unfamiliarity of Salvadoran citizens and potential problems mentioned above by JP Morgan, using BTC might be slightly complicated.

The effects and success of the Bitcoin bill might be unknown now, however, the significance of Bitcoin cannot be denied. You can join this team of crypto investors by picking from our list of the most popular crypto exchanges suitable for your needs.

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