Janet Yellen, the candidate for President-elect of the United States, Joe Biden, as Secretary of the Treasury, speaks as Biden announces candidates and nominees to be part of his economic policy team at its transition headquarters in Wilmington, Delaware, USA, on December 1, 2020.
Leah Millis | Reuters
Treasury Secretary Janet Yellen issued a warning Monday about the dangers bitcoin poses to both investors and the public.
Despite the sharp drop in the price to start the week, the cryptocurrency continues to trade above $ 53,000 as it has received momentum from various sources. Elon Musk’s Tesla recently made a substantial purchase and said it will accept bitcoin for transactions.
However, Yellen said there are still important questions about legitimacy and stability.
“I don’t think bitcoin … is widely used as a transaction mechanism,” he 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 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 configurations. According to Digiconomist, the electricity consumption used in the process leaves an annual carbon footprint equal to the nation of New Zealand.
In addition to consumer concerns, bitcoin is also considered a tool for people involved in various illegal activities because its use is difficult to trace.
Then there is volatility, as the price of the cryptocurrency has experienced rapid peaks and valleys during its existence.
“It’s a very speculative asset and you know I think people should be aware that it can be extremely volatile and I’m concerned about the potential losses that investors may suffer,” Yellen said.
Several government agencies have considered the idea of making an alternative digital currency in the hope that it will open up the global payment system to those who do not have access to it.
The Federal Reserve, where he once held the presidency of Yellen, has studied the issue and discussed the possibility of a new digital currency along with a payment system he hopes to deploy over the next few years.
“I think it could result in faster, safer, and cheaper payments, which I think are important goals,” Yellen said.