Bitcoin is « extremely inefficient », says Janet Yellen

Bitcoin is "extremely inefficient", says Janet Yellen

(Washington) U.S. Treasury Secretary Janet Yellen on Monday said she thinks Bitcoin is « extremely inefficient » for conducting transactions and is often used « for illicit finance.

Published on February 22, 2021 at 12:07 pm

Updated at 1:09 pm

« I don’t think Bitcoin…is widely used as a transaction mechanism as it is used, I’m afraid, often for illicit financing, » said Janet Yellen, interviewed by the New York Times.

She said Bitcoin « is an extremely inefficient way to conduct transactions, and the amount of energy consumed in processing those transactions is staggering, » she added.

« It’s a highly speculative asset, » she said. « I’m concerned about the potential losses that investors could suffer.

These comments helped push down the price of bitcoin, which, after reaching a new record high of more than $58,000 on Sunday, was trading around $52,700 (-9 per cent) on Monday.

The digital dollar deserves some attention…

The digital dollar deserves some attention...

The creation of a digital dollar could be beneficial to the US economy, Janet Yellen said Monday, saying it « makes sense » for central banks to address this issue, especially consumer protection issues.

« It makes sense for central banks to think about this and I know the Federal Reserve (Fed) is looking at that, » Yellen said in an interview with the New York Times, reporting on a joint effort between the Boston Fed and the Massachusetts Institute of Technology (MIT).

The issue of cryptomoney is being closely studied by countries, particularly in the face of the digital currency project initiated by Facebook, the Libra, but also those being examined by central banks, such as the Chinese crypto-yuan.

Digital currencies are stored on electronic media, without the need for a bank account, and are accepted as a means of payment by companies.

For the Treasury Secretary, « there is a lot to look at in terms of consumer protection, but it’s really worth looking at.

« We have a financial inclusion problem. Too many Americans really don’t have access to easy payment systems linked to their bank accounts. I think a digital dollar, a digital central bank currency, could help » improve that situation, she said.

« It could mean faster, safer and cheaper payments, which I think are important goals, » she said.

However, there are many questions about the deployment of cryptography by the United States: « what would be the impact on the banking system, would it cause a huge movement of deposits out of the banks and into the Fed, will the Fed be in touch with individual customers, are there financial stability problems, how could we deal with money laundering and illicit financing problems, » she listed.

The Fed chairman said in October that the United States is considering issuing a digital dollar, but that it would take time.

On the other side of the Atlantic, a digital euro should become a reality within five years, European Central Bank President Christine Lagarde said in January.

The Governing Council of the ECB will decide in the spring whether or not to launch this pharaonic project.

Bitcoin is « extremely inefficient », says Janet Yellen
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