Treasury Secretary Janet Yellen has issued a warning about the dangers of bitcoin for investors and non-investors.
Despite a sharp decrease in price at the start of the week, the digital asset continues to exchange hands above $53,000 as it has got help from various sources. Tesla has recently made a large purchase and announced it will accept bitcoin as payment for transactions.
But Yellen has claimed there are still important questions about its stability and legitimacy.
“I don’t believe bitcoin is very popular as a transaction mechanism,” she said to reporters. “I think it is usually used for illicit finance. It is a very inefficient way of performing transactions, and the energy it consumes when processing those transactions is incredible.”
Mining bitcoin involves having a computer solve complex mathematical equations. The total electric consumption of bitcoin leaves an annual carbon footprint equal to the nation of New Zealand, according to some reports.
Then there’s instability, as the digital asset’s price undergoes rapid rises and falls during its existence.
“It’s a highly speculative asset class and people should know it can be very volatile and I worry about the possible losses some investors might suffer,” Yellen said.
Various agencies have considered creating an alternate digital currency with the hopes that it would open the technology to more people.
The Fed has discussed the possibility of a new digital currency, along with a new payments system, which it might be announcing over the next few years.
“I believe this could result in faster and cheaper payments, which I believe are important goals,” Yellen said.