Janet Yellen, US President Joe Biden’s candidate to become Secretary of the Treasury, speaks as Biden announces nominees and appointees to join his economic policy team at his transition headquarters in Wilmington, Delaware, US, December 1, 2020.
Leah Millis | Reuters
Finance Minister Janet Yellen issued a warning on Monday about the dangers bitcoin poses to both investors and the public.
Despite a sharp price drop at the start of the week, the cryptocurrency continues to trade above USD 53,000 as it has received boosts from various sources. Elon Musk’s Tesla recently made a substantial purchase and has 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,” she told CNBC’s Andrew Ross Sorkin at the New York Times “DealBook” conference. “As far as it is used, I fear it is often for illegal financing. It is an extremely inefficient way to execute transactions, and the amount of energy consumed in processing those transactions is astounding.”
Bitcoin mining requires users to solve complex math equations using powerful computing setups. The electrical consumption used in the process leaves an annual carbon footprint equal to that of the nation of New Zealand, according to Digiconomist.
In addition to issues of consumption, bitcoin is also considered a tool of those involved in a number of illegal activities as its use is difficult to trace.
Then there’s the volatility as the cryptocurrency’s price has seen rapid peaks and troughs throughout its existence.
“It is a very speculative asset and you know I think people should be aware that it can be extremely volatile and I am concerned about potential losses investors could incur,” said Yellen.
Several government agencies have considered the idea of creating an alternative digital currency in the hope that it would open the global payment system to those who do not have access.
The Federal Reserve, where Yellen was once chairman, has studied the issue and discussed the possibility of a new digital currency and payment system expected to be rolled out in the coming years.
“I think it could result in faster, safer and cheaper payments, which I think are important goals,” said Yellen.