This week, El Salvador’s president declared Bitcoin to be legal cash. Analysts at JPMorgan aren’t impressed.
El Salvador proclaimed Bitcoin legal tender on Wednesday night. Nayib Bukele, the country’s autocratic president, spent the rest of the week advertising his Bitcoin nation, erecting mining farms in volcanoes, and reveling in his newfound monetary independence.
The adoption of Bitcoin by investment firm JPMorgan is not a cause for joy. Analysts stated in a note today that while “there are definitely substantial ramifications for that country,” “it is difficult to envisage any actual economic benefits associated with adopting Bitcoin as a second form of legal money” alongside the US dollar.
While Bukele claims that switching to Bitcoin will attract foreign investment (Justin Sun’s TRON has already announced plans to open an office there) and reduce remittance fees, the analysts say that the government’s claims that it will generate short-term employment and investment are “far-fetched.”
The investment bankers in the United States have responded with a resounding “meh.” If anything, the proclamation might jeopardize talks with the International Monetary Fund, which believes El Salvador should reach an agreement with the bank to keep its economy from falling further into debt.
The IMF has not welcomed El Salvador’s adoption of Bitcoin and has previously chastised the Marshall Islands for using a state-backed cryptocurrency to operate its economy. El Salvador’s move, according to an IMF official, “raises a number of macroeconomic, financial, and legal challenges that require extremely careful consideration.”
At the same time, according to JPMorgan, the US, the IMF’s largest shareholder, is uncomfortable with Bukele’s dictatorial tendencies. Bukele took control of the central bank recently and is siding with China. Meanwhile, Biden is making investments in Central America. The analysts stated, “This makes for a difficult balancing act.”
Bitcoin isn’t known for its reliability.