Janet Yellen, nominated for Secretary of the Treasury, Joe Biden, President-elect of the United States, speaks as Biden announces candidates and appoints to serve on his economic policy team at its transition headquarters in Wilmington, Delaware, USA, 1 December 2020.
Leah Millis | Reuters
Treasury Secretary Janet Yellen issued a warning on Monday about the dangers that bitcoin poses to both investors and the public.
Despite a sharp drop in price to start the week, the cryptocurrency continues to trade above $ 53,000 as it has received increases from various sources. Elon Musk’s Tesla recently made a substantial purchase and said it would accept bitcoin for transactions.
However, Yellen said important questions about legitimacy and stability remain.
“I don’t think bitcoin … is widely used as a transactional mechanism,” she told CNBC’s Andrew Ross Sorkin at the New York Times’ DealBook conference. “To the extent that it’s used, I’m afraid it’s often for illicit financing. It’s an extremely inefficient way to conduct transactions, and the amount of energy consumed in processing those transactions is staggering.”
Bitcoin mining requires users to solve complex mathematical equations using high-power computer settings. The electricity consumption used in the process leaves an annual carbon footprint equal to the nation of New Zealand, according to Digiconomist.
In addition to consumer issues, bitcoin is also considered to be a tool for those involved in a number of illegal activities, as its use is difficult to track.
Then there is volatility, because the price of the cryptocurrency has experienced high peaks and valleys during its existence.
“It’s a highly speculative asset and you know I think people should be aware that it can be extremely volatile and I’m worried about the potential losses that investors may suffer,” Yellen said.
Various government agencies have considered creating an alternative digital currency in the hope that it would open up the global payment system to those without access.
The Federal Reserve, where Yellen was once president, studied the issue and discussed the possibility of a new digital currency along with a payment system he expects to launch in the next few years.
“I think it could lead to faster, safer and cheaper payments, which I think are important goals,” Yellen said.