Skip to content

El Salvador’s bitcoin legalization to end in economic collapse, economist Steve Hanke warns

El Salvador's bitcoin legalization to end in economic collapse, economic scholar warns
Jordan Major

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

Steve Hanke, professor of Applied Economics at Johns Hopkins University, discussed the practicality of actually using Bitcoin as legal tender in a country like El Salvador with David Lin, anchor for Kitco News.

Featured image via Kitco News YouTube.

[binance]

Best Crypto Exchange for Intermediate Traders and Investors

  • Invest in cryptocurrencies and 3,000+ other assets including stocks and precious metals.

  • 0% commission on stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.

  • Copy top-performing traders in real time, automatically.

  • eToro USA is registered with FINRA for securities trading.

30+ million Users
Securities trading offered by eToro USA Securities, Inc. (“the BD”), member of FINRA and SIPC. Cryptocurrency offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk, and content is provided for educational purposes only, does not imply a recommendation, and is not a guarantee of future performance. Finbold.com is not an affiliate and may be compensated if you access certain products or services offered by the MSB and/or the BD

Read Next:

Finance Digest

By subscribing you agree with Finbold T&C’s & Privacy Policy

Related posts

Sign Up

or

By submitting my information, I agree to the Privacy Policy and Terms of Service.

Already have an account? Sign In

Services

IMPORTANT NOTICE

Finbold is a news and information website. This Site may contain sponsored content, advertisements, and third-party materials, for which Finbold expressly disclaims any liability.

RISK WARNING: Cryptocurrencies are high-risk investments and you should not expect to be protected if something goes wrong. Don’t invest unless you’re prepared to lose all the money you invest. (Click here to learn more about cryptocurrency risks.)

By accessing this Site, you acknowledge that you understand these risks and that Finbold bears no responsibility for any losses, damages, or consequences resulting from your use of the Site or reliance on its content. Click here to learn more.