Treasury Secretary Yellen Is Wary of Bitcoin
Bitcoin is not only "highly speculative” and used in illicit activities, it is also "an extremely inefficient way of conducting transactions," Yellen said.
Treasury Secretary Janet Yellen has many concerns about Bitcoin.
In an appearance at an online conference Monday morning, Yellen repeated her concerns about Bitcoin’s “highly speculative” nature and use in “illicit” activities and added another: its inefficiency.
“Bitcoin is an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering,” Yellen told host Andrew Ross Sorkin, the founder and editor of DealBook at The New York Times, which sponsored the conference.
Asked about potential regulation of Bitcoin, Yellen said “it’s important” to ensure that the cryptocurrency “is not used as a vehicle for illicit transactions” and that there’s protection for investors. “Regulating institutions that deal in Bitcoin, making sure that they adhere to their regulatory responsibilities … is certainly important,” Yellen said.
She noted her “worry about potential losses that investors can suffer” because of the volatility of Bitcoin.
Yellen’s testimony added to the volatility in Bitcoin in morning trading. Bitcoin prices lost several thousand dollars, dipping below $50,000 before recovering to nearly $52,000 by early afternoon.
Bitcoin was also under pressure from comments that Elon Musk tweeted Saturday, saying that Bitcoin’s prices “seem high.”
His comments were surprising since Tesla, the company Musk co-founded and heads, recently disclosed in an SEC filing that it had purchased $1.5 billion worth of Bitcoin and expects to begin accepting Bitcoin as payment for its products in the near future.
Interest in cryptocurrencies has been growing among institutional investors and central banks, which Yellen acknowledged in her Monday morning appearance.
She said that while a digital dollar maintained by the Federal Reserve and based on a blockchain could yield “faster, safer and cheaper payments,” questions about its impact on the banking system, retail customers and financial stability would have to be considered first.
“There’s a lot of things to consider here, but it’s worth looking at,” Yellen said.
In the meantime, a Bitcoin ETF was recently launched in Canada; BNY Mellon, the oldest bank in the U.S., announced the creation of a new unit to provide custody and administrative services for investment clients; and Morgan Stanley announced it is considering adding Bitcoin to the array of investments at its Counterpoint Global unit.
Pictured: Treasury Secretary Janet Yellen. (Photo: Bloomberg)