Bitcoin adoption is usually taken as the standard for the entire cryptocurrency market with the coin charting out territories for its compatriots. El Salvador adding Bitcoin to its legal tender was the boost that a lot of proponents were looking for with institutional approval becoming a top priority. This news was not met with jubilation by everyone as critics broke down the issues of using Bitcoin as a legal tender.
JP Morgan analysts released a report on Sunday that touched on the problems El Salvador may face once they approve BTC payments for daily use. El Salvador President Nayib Bukele’s decision to make Bitcoin a legal tender laid the groundwork for serious discussions surrounding the digital asset industry.
The JPMorgan report read:
“Daily payment activity in El Salvador would represent approximately 4% of recent on-chain transaction volume and more than 1% of the total value of tokens which have been transferred between wallets in the past year. A large portion of Bitcoin is locked up in illiquid entities, with more than 90% not changing hands in more than a year — with a “significant and rising fraction held by wallets with light turnover.”
The decentralized nature of Bitcoin was appealing to everyone but the report added that a few major companies held the lion’s share of the world’s largest crypto. This was seen as a hindrance to its potential as a medium of exchange. “Bitcoin as a payment system” was an age-old debate ongoing since its inception. Other officials in the cryptocurrency field were not as fascinated by Bitcoin as its proponents with Tether co-founder William Quigley calling it “the worst payment system ever invented”.
The JPMorgan report also claimed that a persistent imbalance of Bitcoin to dollar demand would lead to the destruction of the onshore capital liquidity. Sources within JPMorgan cited fiscal risks associated with Bitcoin transactions that may later translate into legal issues. This was a sentiment polar opposite to that held by Bukele and his cabinet ministers. In his words, Bitcoin will help to counter the country’s low banking penetration rate.