JPMorgan argues that El Salvador’s transaction volume would exceed bitcoin’s operational capacity and that the volatility of bitcoin combined with its poor transactional performance will establish a payment mechanism nobody wants to use:
“Even many proponents of Bitcoin say that, while there’ s an argument it’ s a good store of value, its utility as a payments mechanism is limited.
“Bitcoin is the worst payment system ever invented. It’s terrible, ” said William Quigley, the cofounder of stablecoin Tether and a pioneer of multiple aspects of the cryptocurrency space, in a recent video interview. “ Almost any token is better than Bitcoin as a payment system. ”
Other challenges JPMorgan sees for El Salvador’ s adoption of Bitcoin as legal tender include:
- Recent surveys suggest widespread skepticism and hesitance of Bitcoin as a medium of exchange
- Bitcoin’ s high volatility poses a particularly large challenge in a bimonetary system alongside official dollarization
- A persistent imbalance of demand for Bitcoin/U.S. dollar conversions on the government platform could “cannibalize onshore dollar liquidity” and eventually introduce fiscal and balance of payments risk
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group