Bitcoin has been described as “an extremely inefficient way” to conduct transactions by the US Treasury Secretary.
Her statement follows the decline recorded in the value of major cryptocurrencies including Bitcoin and Ethereum.
Bitcoin saw a 16 percent drop, while Ethereum declined by more than 20 percent.
After hitting a record high of $58,300 over the weekend, the leading cryptocurrency dropped to below $50,000.
Commenting on the volatility of the currency, Yellen said, “Bitcoin is an extremely inefficient way of conducting transactions and the amount of energy that’s consumed in processing those transactions is staggering.”
The past four months have seen a meteoric rise in value for Bitcoin, moving from $10,000 to almost $60,000.
Experts say that crypto assets could see a retracement, as assets are overbought.
Doubting the credibility of transactions conducted using cryptocurrencies, Yellen stated that digital currencies are “often for illicit finance”.
She said “To the extent it is used I fear it’s often for illicit finance.”
Bitcoin: Carbon Footprint and Other Concerns
According to Digicnomist, the process of mining bitcoin contributes to an expanding carbon footprint that is equal to the country of New Zealand.
In mining for bitcoin, high-powered computers are required to solve complex mathematical equations.
It has also been observed that bitcoin has been utilised by many for illicit trading because of the difficulty involved in tracking it.
Yellen cautioned of the use of bitcoin, calling it a “speculative asset”.
She 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.”
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CBN’s Fears Echoed
The points noted by Yellen were echoed by the Central Bank of Nigeria (CBN) after it issued a circular on the ban of trading crypto assets.
It stated that the odds are stacked against small retail and security-loose investors who could lose their investment due to the volatility of the cryptocurrency space.
It said, “More also, repeated and recent evidence now suggests that some cryptocurrencies have become more widely used as speculative assets rather than as means of payment, thus explaining the significant volatility and variability in their prices.
“Because the total number of Bitcoins that would ever be issued is fixed (only 21 million will ever be created), new issuances are predetermined at a gradually decelerating pace.”