Yellen warns of “extraordinarily inefficient” Bitcoin
Janet Yellen, US President-elect Joe Biden’s candidate for Secretary of the Treasury, speaks as Biden announces candidates and candidates for his policy team on December 1, 2020 at his interim headquarters in Wilmington, Delaware, United States.
Leah Millis | Reuters
Treasury Secretary Janet Yellen on Monday warned of the dangers Bitcoin poses to both investors and the public.
Despite a sharp drop in prices earlier in the week, the cryptocurrency continues to trade above $ 53,000 as it has received orders from various sources. Elon Musk’s Tesla recently made a substantial purchase and announced it would accept Bitcoin for transactions.
However, Yellen said there were still important questions about legitimacy and stability.
“I don’t think Bitcoin … is widely used as a transaction mechanism,” she told CNBC’s Andrew Ross Sorkin at a DealBook conference for the New York Times. “To the extent that it is used, my fear is that it is widely used for illicit funding. It is an extremely inefficient way to conduct transactions and the energy consumption to process those transactions is staggering.”
Mining Bitcoin requires users to solve complex math equations using powerful computer setups. The electricity used in this process leaves an annual carbon footprint equivalent to that of New Zealand, according to Digiconomist.
In addition to consumption concerns, Bitcoin is also viewed as a tool by those involved in a range of illegal activities, as its use is difficult to trace.
Then there is volatility as the price of the cryptocurrency has seen rapid peaks and troughs during its existence.
“It is a highly speculative asset and you know I think people should be aware that it can be extremely volatile and I am concerned about the possible losses that investors can take,” Yellen said.
Various government agencies have pondered the idea of creating an alternative digital currency in the hopes that this would open the global payments system to those who do not have access.
The Federal Reserve, of which Yellen once served as chairman, has investigated the issue and discussed the possibility of a new digital currency as well as a payment system that is expected to be rolled out over the next few years.
“I think this could translate into faster, safer and cheaper payments, which I think are important goals,” said Yellen.