Steve Hanke warns BTC could 'completely collapse the economy' of El Salvador
Steve
Hanke, a professor of applied economics at Johns Hopkins University,
has warned that El Salvadors recent adoption of Bitcoin (BTC) as legal
tender has the potential to “completely collapse the economy.”To get
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Steve
Hanke served as a senior economist under President Ronald Reagan
administration from 1981 to 1982. Hanke has previously described BTC as a
speculative asset “with a fundamental value of zero,” and in April the
78-year-old tweeted “cryptocurrencies are the future of money. Bitcoin
is not.”
Speaking with streaming financial news provider Kitco News
on June 15, the university professor noted that BTC hodlers from
regions such as Russia and China could now target El Salvador to cash
out their holdings — essentially draining the country of its U.S.
dollars:
“It has the potential to completely collapse the economy
because all the dollars in El Salvador could be vacuumed up and there'd
be no money in the country. They don't have a domestic currency. ”
During
the interview, the economist described the elected representatives in
El Salvador who voted in favor of president Nayib Bukeles Bitcoin law as
“in a word, stupid,” and questioned how BTC could function as a legal
tender in day to day transactions, in a country where most citizens rely
on cash.
“You're not going to pay for your taxi ride with a
Bitcoin. It's ridiculous [...] You've got 70 percent of the people in El
Salvador don't even have bank accounts,” he said.
On June 11,
JPMorgan echoed similar sentiments but in more measured language, with
the firm stating in a client note that it was difficult to see any
“tangible economic benefits associated with adopting Bitcoin as a second
form of legal tender, and it may imperil negotiations with the IMF. ”
The
Central American Bank for Economic Integration (CABEI) doesn‘t share
this view however and stated yesterday that El Salvador’s adoption of
BTC is innovative and “creates many spaces and opportunities. ”
The
multinational bank also revealed that it will be forming a technical
advisory group to aid El Salvador in its transition to using Bitcoin as
legal tender.
Professor Hanke speculated that “dark forces are
clearly behind this” in El Salvador, who want to use Bitcoin to get
their hands on U.S. dollars.
Related: El Salvador reportedly weighing paying employees in Bitcoin
The
economist also described remittances across borders in Bitcoin as
“nonsensical,” as he thinks the asset will need to be converted
instantly to dollars to be able to use it.
“If grandma is down in
El Salvador is waiting for her remittances and you want to send Bitcoin
like that its fine, but what does she do? She has to go to the ATM to
get dollars because that's the only way you can buy something,” Hanke
said. However, businesses in El Salvador will be mandated to accept
Bitcoin.
An article in Foreign Policy by trenchant Bitcoin critic
David Gerard, author of the book Attack of the 50 Foot Blockchain
speculated that as El Salvador cant print U.S. dollars, its adoption of
BTC may be part of a move to source U.S. dollar liquidity from its
citizens to pay back foreign debts.
The Wall