The septuagenarian professor of Economics at Johns Hopkins University is the latest academic to wade into El Salvador’ recent BTC adoption as legal tender. In his characteristically fiery takes, Steve Hanke warned that the Central American nation’s latest move has the potential to “completely collapse the economy.”
Hanke, who served as part of the economic advisory team during the Reagan administration from 1981 to 1982 does not shy away from criticising bitcoin. In a recent publication on Nationa Review, Steve Hanke described BTC as nothing but a speculative asset “with a fundamental value of zero”. A month later, Hanke would troll the Bitcoin community in a tweet where he said, “cryptocurrencies are the future of money. Bitcoin is not.”
The senior economist, while speaking with Kitco News on June 15, expressed concerns about the possible targeting of El Salvador’s economy by United States competitor nations like China and Russia. Specifically, Steven Hanke said
“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 also didn’t hide his displeasure towards the El Salvadorian congresspeople for passing the landmark Bitcoin Law which effectively made BTC a legal tender mandating merchants and businesses to start accepting bitcoin as a form of payment and settlement for goods and services. Hanke described those who supported President Nayib Bukele's bill as "in a word, stupid," further questioning how pragmatic that law is, especially with his doubts in BTC functioning as a legal tender where the majority of its inhabitants operate on cash and do not posses bank accounts.
“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,” Hanke derides El Salvador's latest move.
He further speculated that “dark forces are behind this [El Salavdor’s Bitcoin Law] aiming to use Bitcoin to start ferrying away the country’s US dollars.
Meanwhile, the Central American Bank for Economic Integration (CABEI) shares an opposing view with Hanke as it lauded El Salvador's Bitcoin Law saying it "creates many spaces and opportunities." The bank has also offered to form a technical advisory group aiming to help El Salvador transition easily from its conventional payment to cryptocurrency system.
Muneeb Ali, a pakistani born and professor of computer scientist and co-founder of Blockstack, an open-source decentralized computing platform in a reactionary post although not directly referencing Steve Hanke tweeted saying:
Dear Economics Professors,
Bitcoin takes from ivory towers are hilariously bad. You need to get your hands dirty and be in the trenches to understand the power of Bitcoin.
(An academic who left academia.)
While some academics like Hanke continue to voice their pessimism for the Central American nation's new Bitcoin Law, President Nayib Bukele’s move is already proving profitable both on a micro and macro economic level for his nation. Reuters reported that small transfers of bitcoin to El Salvador jumped over four-fold in May from a year ago. El Salvador’s real estate sector is also taking a positive hit. A recent tweet by @DocumentingBTC handle shared saying “Google searches f0r ‘El Salvador Real Estate’ went to the moon after the nation adopted Bitcoin last week”.