Janet Yellen says using bitcoin is an ‘extremely inefficient’ way to transact |
Treasury Secretary Janet Yellen on Monday expressed doubts about the utility of bitcoin as payment method and warned investors of the risks involved in using the world’s most famous cryptocurrency.
“I don’t think that bitcoin is widely used as a transaction mechanism,” Yellen told the DealBook DC Policy Project. “It’s an extremely inefficient way of conducting transactions and the amount of energy that’s consumed in processing those transactions is staggering.”
Bitcoin mining has been known to consume high amounts of energy, with total worldwide electricity consumption higher than that of Argentina, the Netherlands, and the United Arab Emirates, and soon to eclipse Norway’s, according to the BBC.
Meanwhile, interest in bitcoin mining is on the rise as the asset rallies, and miners earned a combined $1.1 billion in January, up 62% from December.
Apart from energy concerns, critics have also long said bitcoin is primarily a tool to conduct illegal activities, such as money laundering or drug trafficking, a concern that Yellen echoed in her talk.
“To the extent it is used, I fear it’s often for illicit finance,” Yellen said. “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.”
The comments by the Treasury Secretary come a day after bitcoin hit a new record of $58,042, bringing its year-to-date gain to over 100%. On Friday, the popular cryptocurrency reached a market capitalization of $1 trillion. Despite pulling back on Monday, bitcoin is still trading above the $53,000-level.
Yellen joins a a growing chorus of regulators who have given their thoughts on the cryptocurrency as it climbs to dizzying heights. Some regulators, such as ECB president Christine Lagarde, believe it should be regulated on a global level.
“I think that there are criminal investigations that have taken place that I’m sure will continue to take place that demonstrate it very clearly,” Lagarde told Reuters in January.
Lagarde said bitcoin is not a currency but is instead a “highly speculative asset which has conducted some funny business and some interesting and totally reprehensible money laundering activity.”
Bitcoin traded at $53,193 at 1:57PM E.T. on Monday.