Steve Hanke, who served as a senior economist under President Ronald Reagan’s administration from 1981 to 1982, has warned that El Salvador’s decision to authorize bitcoin as legal tender has the potential to “completely collapse the economy.” The economist had 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.”
BTC holders from other regions could target El Salvador to cash out their holdings.
During an interview with financial news provider Kitco News on June 15, the university professor said that BTC hodlers from regions such as Russia and China could now target the Central American country to cash out their holdings and 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,” Hanke noted.
Steve Hanke calls El Salvador’s new bitcoin law “stupid.”
Steve Hanke described the elected representatives in El Salvador who voted in favor of president Nayib Bukele’s Bitcoin law as “in a word, stupid.” He also questioned how bitcoin could function as a legal tender in day-to-day transactions in a country where most citizens rely on cash. As reported earlier, 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 the second form of legal tender, and it may imperil negotiations with the IMF.” An IMF spokesperson also criticized El Salvador’s decision to adopt BTC as legal tender.