El Salvador, earlier this month, became the world’s first nation to make Bitcoin legal tender. While the crypto community welcomed the development, many raised their concerns over the decision’s impact on the country’s economy.
Among many, Steve Hanke, professor of Applied Economics at Johns Hopkins University, expressed his concerns in a tweet as well as in an interview, saying that in practice, the biggest digital currency will still not be used in an everyday transaction given the current scenario of El Salvador’s economy.
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).
— Steve Hanke (@steve_hanke) June 10, 2021
Hanke made the statement during an interview at streaming financial news provider Kitco News on Tuesday.
“The big problem with cryptos, in general, is that you can’t convert them into actual real legal tender that’s usable cheaply and quickly,” Hanke told Kitco News. “You can’t Bitcoin, for example, cheaply and easily convert into US dollars,” he added.
The problem will not be accelerated, “it has the potential to completely collapse the economy because all dollars of El Salvador could be vacuumed up and there could be no money in the country,” Hanke said.
“They don’t have the domestic currency. They use the US dollar, that is the currency of El Salvador,” he added.