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.
- 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 – El Salvador uses the U.S. dollar as its currency – 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.
- 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.