Janet Yellen, nominated US President-elect Joe Biden for Treasury Secretary, speaks as Biden announces nominees and nominees to serve on his economic policy team at his transition headquarters in Wilmington, Delaware, USA, December 1, 2020.
Leah Millis | Reuters
Treasury Secretary Janet Yellen issued an alert on Monday about the dangers that bitcoin poses to both investors and the public.
Despite a sharp drop in price earlier in the week, the cryptocurrency continues to trade above $ 53,000 as it has received increases from several sources. Tesla from Elon Musk recently made a substantial purchase and said he will accept bitcoin for transactions.
However, Yellen said that 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 usually for illicit financing. It is an extremely inefficient way of conducting transactions, and the amount of energy consumed in processing those transactions is impressive.”
Bitcoin mining requires users to solve complex mathematical equations using high-powered computer configurations. The electrical consumption used in the process leaves an annual carbon footprint equal to that of the New Zealand nation, according to the Digiconomist.
In addition to consumer concerns, bitcoin is also considered a tool for those who are involved in a number of illegal activities, because its use is difficult to track.
Then there is volatility, since the price of the cryptocurrency had rapid ups and downs during its existence.
“It is a highly speculative asset and you know that people should be aware that it can be extremely volatile and I am concerned about the potential losses that investors may suffer,” said Yellen.
Several government agencies have considered the idea of making an alternative digital currency with the hope that it would open up the global payment system to those who do not have access.
The Federal Reserve, where Yellen was already president, studied the issue and discussed the possibility of a new digital currency along with a payment system it hopes to implement in the coming years.
“I think this can result in faster, safer and cheaper payments, which I think are important goals,” said Yellen.