“Bitcoin is an extremely inefficient way of conducting transactions and the amount of energy that’s consumed in processing those transactions is staggering,” Yellen said at the 2021 DealBook DC Policy Project.
Yellen’s comments came as carnage ensued in the cryptocurrency world with Bitcoin plummeting 16 per cent and Ethereum sinking more than 20 per cent on the cryptocurrency exchanges.
The former chief of the US Federal Reserve also said that it was time for the US treasury department to study the merits of a digital dollar currency. Yellen said that a digital dollar, maintained by the US Federal Reserve and based on a blockchain, “could result in faster, safer and cheaper payments.”
Yellen’s comments are the latest salvo by high-ranking government and central bank officials in advanced economies against cryptocurrencies.
Recently, European Central Bank chief Christine Lagarde had blasted cryptocurrencies for felicitating illicit finance. “For those who had assumed that it might turn into a currency — terribly sorry, but this is an asset and it’s a highly speculative asset which has conducted some funny business and some interesting and totally reprehensible money-laundering activity,” Lagarde said in an online event organized by Reuters.
In India, the government has proposed to table a bill in the Parliament that will ban all private cryptocurrencies like Bitcoin and enable the launch of a digital rupee under the ambit of the Reserve Bank of India.
Supporters of Bitcoin have argued that the cryptocurrency provides a decentralised way of conducting finance and liberates the financial system from the inefficiencies caused by centralised finance.
The blockchain technology that underpins Bitcoin is considered to be one of the most path-breaking technological innovations in recent decades. Recently, investors have also argued that Bitcoin’s limited supply makes it a better store of value compared to the fiat currency and even gold.
Elon Musk-owned Tesla had recently disclosed that it converted a portion of its cash into Bitcoin and may accept it as payment in the future for its product.
Bitcoin prices had more than doubled in the previous one month prior to today’s fall and hit a market capitalisation of $1 trillion. At CoinDesk, a Bitcoin was quoting $51,894, down 11 per cent.