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Bitcoin Could 'Completely Collapse' El Salvador's Economy, Economist Warns

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Published on:
June 16, 2021

Steve Hanke says it is "nonsensical" to think Bitcoin remittances will work in El Salvador.

Bitcoin Could 'Completely Collapse' El Salvador's Economy, Economist Warns

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When El Salvador boldly announced plans to embrace Bitcoin as legal tender, there was a worry that the proposals delivered more questions than answers.

 

With less than 90 days to go until BTC is elevated to the same status as the U.S. dollar, one of the country’s ministers has said talk of paying salaries in Bitcoin is too premature.

 

Rolando Castro was responding to reports that suggested the possibility was being actively examined by two government ministries.

 

Elsewhere, dire warnings about the potential consequences of El Salvador’s move are continuing to emerge.

 

Steve Hanke, an economics professor who briefly served in Ronald Reagan’s administration, has even claimed Bitcoin “has the potential to completely collapse” El Salvador’s economy.

 

Questioning the practicality of El Salvador’s “Bitcoin Law,” which passed with a “supermajority,” he told Kitco News:

“You're not going to pay for your taxi ride with a Bitcoin. It's ridiculous ... 70% of the people in El Salvador don't even have bank accounts.”

Hanke is also unconvinced about the argument that Bitcoin could shake up the world of remittances — describing it as “nonsensical.”

 

Not All Doom and Gloom?

Of course, if you look at the Twitter account of El Salvador’s President Nayib Bukele, there’s still plenty of positivity surrounding his country’s journey to adopting Bitcoin.

 

He’s pointed to how Bitcoin remittances under $1,000 that were sent by El Salvadoreans abroad collectively stood at $424,000 in May 2020. Fast forward one year and this stood at $1.7 million.

 

Google searches for “El Salvador real estate” have gone through the roof and there’s hope this could also encourage investment in the Central American nation.

 

The president retweeted a post from @BitcoinBeach, which said:

“If you just randomly showed up in #ElSalvador this week you would definitely think there was a huge #Bitcoin conference going on. Non-stop flow through the airport of company leaders looking to support this moment and bring jobs to El Salvador.”

Author(s)

Connor Sephton

I cover the crazy world of crypto.

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