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Adopting Bitcoin as Legal Tender Could Ruin El Salvador's Economy, Economist Says
Bitcoin holders elsewhere could suck up all the dollars in El Salvador "like a vacuum cleaner."
El Salvador's adoption of bitcoin as legal tender could cause its economy to collapse, according to Steve Hanke, an economist and professor at Johns Hopkins University.
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- The economist told Kitco News in an interview Tuesday that the decision by El Salvador parliament was "stupid."
- Hanke argued that the "dollarization" of the country's economy ā El Salvador uses the U.S. dollar as its currency ā could lead to bitcoin holders elsewhere, including in Russia, China or Iran, "sucking up all the dollars in El Salvador like a vacuum cleaner."
- "All the cash in El Salvador that's in dollars could be sucked up in a short matter of time," he said.
- Hanke has previously tweeted that bitcoin would not bring down the cost of remittances, as it costs 8% to cash out bitcoin at an ATM, compared with the 0%-4% charged by Western Union or MoneyGram.
El Salvador president Nayib Bukele claims it's cheaper to send remittances via #Bitcoin to ELSL than by traditional alternatives. This is a big LIE. To send $200 via Western Union or MoneyGram cost 0%-4%. To cash out Bitcoin at an ATM in ELSL, it cost 8% on avg (@CoinATMRadar).
ā Steve Hanke (@steve_hanke) June 10, 2021
- The counterargument is that El Salvadorans could spend bitcoin directly without needing to convert it into dollars.
- "Lots of luck," Hanke said. "There's no way [that's] going to happen, period."
- The economist is a crypto skeptic, comparing the market with the Dutch tulip bubble. Still, he did join the board of crypto startup AirTM in 2018.
Read more: El Salvador Adopts Bitcoin: Hype or History in the Making?
Jamie Crawley
Jamie has been part of CoinDesk's news team since February 2021, focusing on breaking news, Bitcoin tech and protocols and crypto VC. He holds BTC, ETH and DOGE.
