Professor of Applied Economics at Johns Hopkins University Steve Hanke has warned that El Salvador’s decision to legalize bitcoin as a legal tender will have consequences terming the move as economic stupidity.
Speaking to Kitco News, Hanke noted that El Salvador, which relies on the dollar as its fiat currency, will potentially experience a complete economic collapse. He stated that the country faces the threat of running out of money since it has no local currency.
He observes that bitcoin holders from other countries who intend to cash out the digital currency will target the South American country rendering it dry of any dollars. Hanke, who has opposed bitcoin’s payment status, claimed that criminal elements are behind the historic decision by El Salvador.
“They will suck up all the dollars and outsell, or like a vacuum cleaner going through there, and the economy will collapse. So that’s why it’s so stupid. It has the potential to completely collapse the economy because there’d be no money in the country. They don’t have a domestic currency,” said Hanke.
According to Hanke, although bitcoin has been legalized as a legal tender, it may not serve the intended purposes. He finds it absurd to introduce cryptocurrencies as legal tender when most citizens have no access to bank accounts.
Warning to other South American countries
Furthermore, Hanke warned that criminal forces might be pushing politicians in other South American countries like Panama and Paraguay to legalize bitcoin. He noted that if the countries follow suit like El Salvador, it will be disastrous.
Additionally, Hanke’s view differs from Digital asset lending firm Celsius Network CEO Alex Mashinsky, who believes more countries will emulate El Salvador. According to Mashinsky, if the adoption occurs in high population countries like Brazil and Nigeria, the value will likely soar to $160 000 in 2021.
Related video: Legalizing Bitcoin will ‘completely collapse El Salvador’s economy’ – Steve Hanke
Featured image via Kitco News YouTube.