Share this article
El Salvador Could Face 'Limitation' on Bitcoin's Use as Medium of Exchange: JPMorgan
The bank points to bitcoin's illiquid nature, volatility and U.S. dollar conversion risk as major limitations for its use as legal tender.
Updated Apr 10, 2024, 3:13 a.m. Published Jul 12, 2021, 2:03 a.m.
Make us preferred on Google
Global investment bank JPMorgan says bitcoin's use in El Salvador's economy faces headwinds, suggesting a potential "limitation" on its use case as a medium of exchange may emerge.
STORY CONTINUES BELOW
Don't miss another story.Subscribe to the Crypto Daybook Americas Newsletter today. See all newsletters
In a report by the bank on Thursday and reported by Bloomberg Sunday, JPMorgan said problems could arise due to the fact that much bitcoin is tied up in illiquid entities, 90% of which hasn't changed hands in over a year.
The bank points to daily payment activity in the country, which would represent around 4% of recent on-chain transaction volume and over 1% of the total value of tokens that have transferred between wallets in 12 months.
This represents "potentially a significant limitation on its potential as a medium of exchange," JPMorgan said.
El Salvador's legislature voted and passed its Bitcoin Law on June 8 that will see the country formally adopting the crypto as legal tender on Sept. 7.
Some critics are questioning the move by the country's President Nayib Bukele, who initiated the bill, while others argue it violates their constitutional rights.
JPMorgan also outlined a recent survey showing a majority of Salvadorans viewed the new law as "not at all correct" with a further 46% of those polled saying they had no idea what bitcoin was.
Read more: El Salvador’s Bitcoin Law Effective September, E-Wallets to Get $30 Worth of Crypto
And while that may cause complications, JPMorgan said that aside from the illiquid nature of the asset, the biggest concerns facing bitcoin's adoption into the country's economy lay in its volatility and imbalance of demand for bitcoin to U.S. dollars.
The bank said conversions on the government platform had the potential to “cannibalize onshore dollar liquidity" leading to risk in a balance of payments and fiscal stability.
More For You
KuCoin captured a record share of centralised exchange volume in 2025, with more than $1.25tn traded as its volumes grew faster than the wider crypto market.
What to know:
- KuCoin recorded over $1.25 trillion in total trading volume in 2025, equivalent to an average of roughly $114 billion per month, marking its strongest year on record.
- This performance translated into an all-time high share of centralised exchange volume, as KuCoin’s activity expanded faster than aggregate CEX volumes, which slowed during periods of lower market volatility.
- Spot and derivatives volumes were evenly split, each exceeding $500 billion for the year, signalling broad-based usage rather than reliance on a single product line.
- Altcoins accounted for the majority of trading activity, reinforcing KuCoin’s role as a primary liquidity venue beyond BTC and ETH at a time when majors saw more muted turnover.
- Even as overall crypto volumes softened mid-year, KuCoin maintained elevated baseline activity, indicating structurally higher user engagement rather than short-lived volume spikes.
More For You
Here's what bitcoin bulls are saying as price remains stuck during global rally
It's about a lot more than "zooming out." Supply overhangs and investor "muscle memory" regarding gold help explain bitcoin's poor absolute and relative performance.
What to know:
- Bitcoin has failed so far to act as an inflation hedge or safe-haven asset, lagging badly behind gold, which has surged amid high inflation, wars, and interest rate uncertainty.
- Crypto advocates argue that bitcoin’s weakness reflects a temporary supply overhang, investor “muscle memory” favoring familiar precious metals and its correlation with risk assets, rather than a collapse in long-term demand.
- Many bitcoin proponents still see BTC as a superior long-term store of value and “digital gold,” predicting that, once traditional hard assets are overbought, capital will rotate into bitcoin, allowing it to “catch up” to gold.
Top Stories
