Onlangs aka El Salvador a new law to that bitcoin (BTC) recognized as legal tender. However, this decision could put pressure on bitcoin and cause problems for the cryptocurrency as well as creating the country. That says JPMorgan Chase, the largest bank in the US, reports Bloomberg news agency on July 11.
El Salvador’s declaration of Bitcoin as legal tender could create challenges for both the country and the cryptocurrency, according to a team from JPMorgan Chase https://t.co/Pk7FW5d3Q7
— Bloomberg (@business) July 11, 2021
According to a team at JPMorgan, much of bitcoin is locked in “illiquid entities.” More than 90% of bitcoin’s circulating supply has not moved in over a year. According to JPMorgan, Bitcoin’s illiquid nature would “be a significant limitation on its potential as a means of payment.”
JPOrgen lists three more potential stumbling blocks. The first is that recent studies indicate a great deal of skepticism. Earlier today you could read on Crypto Insiders that as many as three quarters of El Salvadorians are skeptical, less than 20% approve of the law and even 65% are actually not open to it.
Furthermore, according to JPMorgan, the high volatility of bitcoin could be challenging for a “bimonetary” system and an ongoing imbalance in the demand for bitcoin/dollar conversions could create tax problems.
Bitcoin has mainly gained status as a store of value in recent years, but crypto has lost its prestige as a potential means of payment. This is partly due to the low transaction speed of the network: Bitcoin can process a maximum of seven transactions per second (TPS). William Quiqley, co-founder of Tether, even calls it the worst payment system ever:
“Bitcoin is the worst payment system ever invented. It’s terrible. Almost any token is better than Bitcoin as a payment system.”
However, Lightning Network is not mentioned anywhere in the article. This so-called “layer-2 scaling solution” could solve many of the above problems and El Salvador has already announced it will use it.
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