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Adopting Bitcoin as Legal Tender Could Ruin El Salvador's Economy, Economist Says
Bitcoin holders elsewhere could suck up all the dollars in El Salvador "like a vacuum cleaner."
Updated Sep 14, 2021, 1:11āÆp.m. Published Jun 16, 2021, 10:10āÆa.m.
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.
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- 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 ā El Salvador uses the U.S. dollar as its currency ā 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.
El Salvador president Nayib Bukele claims it's cheaper to send remittances via #Bitcoin to ELSL than by traditional alternatives. This is a big LIE. To send $200 via Western Union or MoneyGram cost 0%-4%. To cash out Bitcoin at an ATM in ELSL, it cost 8% on avg (@CoinATMRadar).
ā Steve Hanke (@steve_hanke) June 10, 2021
- 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?
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