Treasury Secretary Janet Yellen issued a warning Monday about the dangers that bitcoin poses both to investors and the public.
Despite a sharp slide in price to start the week, the cryptocurrency continues to trade above $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 remain important questions about legitimacy and stability.
“I don’t think that bitcoin … is widely used as a transaction mechanism,” she told CNBC’s Andrew Ross Sorkin at a New York Times DealBook conference.
“To the extent it is used I fear it’s often for illicit finance. It’s an extremely inefficient way of conducting transactions; and the amount of energy that’s consumed in processing those transactions is staggering.”
Mining bitcoin requires users to solve complex mathematical equations using high-powered computer setups.
The electric consumption used in the process leaves an annual carbon footprint equal to the nation of New Zealand; according to Digiconomist.
In addition to consumption concerns, bitcoin also is considered to be a tool of those involved in a number of illegal activities; because its use is difficult to trace.
Then there’s volatility, as the cryptocurrency’s price has seen rapid peaks and valleys during its existence.
“It is a highly speculative asset and you know I think people should be aware it can be extremely volatile; and I do worry about potential losses that investors can suffer,” Yellen said.
Various government agencies have contemplated the idea of making an alternate digital currency with the hopes that; it would open up the global payments system to those who don’t have access.
The Federal Reserve, where Yellen once served as chair, has studied the issue; and also discussed the possibility of a new digital currency; along with a payments system it expects to roll out over the next several years.
“I think it could result in faster, safer and cheaper payments, which I think are important goals,” Yellen said.
