Steve Hanke has condemned the legalization of Bitcoin in El Salvador. The economist believes the decision will “completely collapse” El Salvador’s economy. He called the move “stupid.” His reasoning around this being that El Salvador is a dollarized nation and making Bitcoin legal tender would be detrimental to the economy.
Professor Hanke was on Kitco News to talk about monetary policies around the world. According to him, criminal interests have been a driving force behind the decision.
Related Reading | Senator Cynthis Lummis: I’m All In On Bitcoin
“The criminal element wants to be able to get in and actually obtain real legal greenbacks. They want greenbacks. And greenbacks are in fact the legal tender and money in El Salvador.”
Bitcoin Is A Speculative Asset, Not A Currency
El Salvador has received a lot of support in its decision to make Bitcoin a legal tender. On the back of that support though, there has been a lot of criticism accompanying the decision. Debates on how Bitcoin would actually be used in day-to-day transactions have been rampant.
On this, Steve Hanke brought up that it would be very difficult to use bitcoin on a day-to-day basis. He alluded to the high conversion rates and high send fees. Pointing out that legal tenders should be easy and inexpensive to use, which Bitcoin is not.
Bitcoin chart | Source: BTCUSD on TradingView.com
Hanke believes the legalization leaves the vulnerable. He stated that holders from other countries would exploit this vulnerability by using the country to cash out their holdings. He purported that dark forces wished to completely drain the country of its U.S. dollars.
“They don’t have a domestic currency,” Hanke said regarding the country’s legal tenders.
Bitcoin Is Not A Scam
Despite the opening salvo on digital currencies, Hanke admitted that he does not believe Bitcoin is a scam.
According to him, Bitcoin is a speculative asset and should be treated accordingly.
Giving the asset a fundamental value of zero, Hanke reiterated that it was not a currency.
“Bitcoin will face competition and will eventually see its value be driven down considerably over where it is right now.”
One of the major reasons given by the president for the legalization of Bitcoin was the ease of use in remittances back home. Hanke responded that this was nonsensical.
Referring to a tweet he made, he laid out that while sending fiat to the country costs anywhere between 0 to 4 percent, it costs 8 percent to convert Bitcoin to cash.
The professor pointed out that this is much too high a fee to be paying for remittance.
Professor Steve Hanke served as a senior economist under Ronald Reagan on the Council of Economic Advisers in the early 1980s. He’s currently a professor of applied economics at Johns Hopkins University.
Featured image from Disruption Banking, chart from TradingView.com