El Salvador's Bukele is "playing with fire" by disregarding the World Bank and IMF's warnings on Bitcoin, according to renowned economist Steve Hanke.

El Salvador's adoption of Bitcoin as legal cash, according to Steve Hanke, a professor of applied economics at John Hopkins University, might lead to monetary turmoil and economic catastrophe. He claims that if El Salvador continues to enact the Bitcoin Law, which is slated to take effect in September, the country will be "burned."


Hanke made the point in a recent tweet, and he elaborated in a National Review essay. The piece, headlined "El Salvador's Road to Currency Chaos and Economic Collapse," explained why he believes President Nayib Bukele's policies will lead to the country's demise.

The concerns he has about the law are similar to those raised by the World Bank, the International Monetary Fund (IMF), and the United States. The US Department of State has previously stated. The professor points out that all of these organizations have given warnings to the government about the potential consequences of their new law, and that Nayib Bukele's deafening silence could have consequences.

Two IMF experts, Tobias Adrian Rhoda Weeks-Brown and Tobias Adrian Rhoda Weeks-Brown, warned in June that El Salvador's Bitcoin law might lead to highly volatile commodities prices. They also highlighted the heightened risk of bitcoin assets being used in the financing of terrorism and in violation of anti-money laundering legislation.

The Financial Action Task Force (FATF), an international organization that combats money laundering and terrorism funding, has expressed similar views on the country's decision. El Salvador had traditionally maintained a spotless FATF record. That could change if the Bitcoin law passes, as the regulatory body demands some Know Your Customer (KYC) norms for using digital currencies, which El Salvador may not be able to achieve if the Bitcoin law passes.

President Bukele's authoritarian tendencies, according to the economist, are another element that has kept the policy in place. Hanke believes the law is imposing Bitcoin as a forced tender on the country. While Bukele has garnered praise from the bitcoin community, he believes that El Salvadorians embrace the idea solely because Bukele says so, rather than because of its merits. Hanke agrees with the World Bank's assessment, claiming that the country's existing legal money, the US dollar, has performed admirably and continues to do so.

Similarly, the article points out that, to top it all, the market was indicating that El Salvador's decision was a mistake. The country's bonds sank dramatically after the bill was enacted, and their international rating was also reduced, in what may be described as a market retreat.

“The markets are telling us that Bukele's authoritarian tendencies and outlandish cryptocurrency ideas will lead to currency turmoil and economic collapse,” he adds, adding that as a result, the United States would see a surge of immigrants from another failing Central American country.

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