thecoinrepublic.com
- According to Steve Hanke, El Salvador’s approval of bitcoin as legal tender could lead to an economic downturn
- Hanke expressed his thoughts in an interview with Kitco News
- He predicted that bitcoin holders in Russia or China would look to cash out their holdings in El Salvador
El Salvador’s adoption of Bitcoin (BTC) has been dubbed economic stupidity by Steve Hanke, an economist and John Hopkins University professor. Hanke made the remarks in a Kitco News interview. From 1981 to 1982, Steve Hanke worked as a senior economist in President Ronald Reagan’s administration. Hanke has previously described Bitcoin as a speculative asset with no intrinsic value, and in April, the 78-year-old tweeted that cryptocurrencies are the future of money. Bitcoin isn’t one of them.
Hanke’s thoughts on El Salvador legalising bitcoin
Hanke made these remarks in response to the interviewer’s question about El Salvador’s decision. The interviewer specifically inquired if the country’s BTC adoption could be interpreted as a signal. Is it time to accept Bitcoin as a universal currency now that El Salvador has accepted it as legal tender?
Hanke, on the other hand, stated that Bitcoin is not used in everyday transactions for practical reasons. It’s absurd to think that you’d pay for a taxi ride with bitcoin. This is not going to happen because 70% of El Salvador’s population does not even have a bank account. And now you’re telling me that they’re going to use cryptocurrency?
After calling President Nayib Bukele and members of the government who voted to pass the bitcoin law stupid, Hanke expressed doubts about the cryptocurrency’s ability to function smoothly in a country where the majority of people do not have bank accounts.
On June 15, the university professor told streaming financial news provider Kitco News that BTC holders from Russia and China could now target El Salvador to cash in their holdings, effectively draining the country of its US dollars. Hanke said that it has the potential to completely collapse the economy because all of El Salvador’s dollars could be sucked up leaving the country without money. They do not use a National Currency.
El Salvador’s adoption of bitcoin, according to Hanke, has criminal elements
El Salvador’s adoption of Bitcoin, according to Hanke, is the result of criminal elements.. He added that criminal elements may try to persuade other South American countries, such as Panama and Paraguay, to adopt the top cryptocurrency as well. According to the Applied Economics professor, if these countries adopt crypto, it will be disastrous. Criminals will use these countries to gain access to real currency in the form of greenbacks, according to Hanke.
Criminal interests may have aided the Latin American nation’s adoption of cryptocurrency, according to the economist, who served on former President Ronald Reagan’s council of economic advisers in the 1980s.
He claims that the criminal element wants to be able to get in and obtain real legal money. They’re looking for greenbacks and in El Salvador, greenbacks are the legal tender and money. Governments and central banks all over the world will be watching El Salvador’s experiment to see if bitcoin becomes a common payment and remittance method.
Issues with Bitcoin being used as legal tender
Cross-border Bitcoin remittances, according to the economist, are insane because the asset will need to be instantly converted into dollars in order to be used.
If Grandma is waiting for her remittances in El Salvador and you want to send Bitcoin, that’s fine, but what does she do? Hanke explained that she needs to go to the ATM to get dollars because that is the only way she can buy something. Businesses in El Salvador, on the other hand, will be forced to accept Bitcoin.
Since El Salvador cannot print US dollars, an article in Foreign Policy by incisive Bitcoin critic David Gerard, author of the book 50ft blockchain attack, hypothesised that its adoption of BTC could be part of an effort to source US dollar cash from its citizens to pay off their foreign debts.
JPMorgan said last week that adopting bitcoin as a second form of legal tender would be difficult to justify, and that doing so could jeopardise relations with the International Monetary Fund.