Adopting Bitcoin as Legal Tender Could Ruin El Salvador's Economy, Economist Says

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.

Read more: El Salvador Adopts Bitcoin: Hype or History in the Making?