US Treasury Secretary Janet Yellen said on Monday that she was keen on establishing a digital dollar that could be safer and faster to conduct transactions as opposed to the existing crypto-currency Bitcoin
WASHINGTON (Pakistan Point News / Sputnik - 22nd February, 2021) US Treasury Secretary Janet Yellen said on Monday that she was keen on establishing a digital dollar that could be safer and faster to conduct transactions as opposed to the existing crypto-currency Bitcoin.
"A digital dollar, a central bank digital currency, could help with, you know... faster, safer and cheaper payments," Yellen said in a live-streamed discussion hosted by the New York Times's Dealbook.
Yellen noted that Bitcoin is widely used as a transaction mechanism to the extent that it is used often for illicit finance.
"It's an extremely inefficient way of conducting transactions and the amount of energy that's consumed in processing those transactions are staggering," Yellen said.
Bitcoin hit record highs above $58,000 at the weekend, skyrocketing from below $11,000 at the end of September. At its peak, its market capitalization exceeded $1 trillion, matching tech giants like Amazon, Google and Microsoft, as speculators and even endowments of top universities like Harvard and Yale bought into the 12-year-old digital currency.
As Yellen spoke on Monday, the price of Bitcoin fell 11 percent at one point from its weekend record high.
Yellen referred specifically to this price instability, while discussing Bitcoin's less desirable traits.
"It is a highly speculative asset, and you know, I think people should be aware that it's extremely volatile. I do worry. I do worry about the potential losses that investors could suffer," she said.
However, Yellen acknowledged that even a digital currency issued by the Federal Reserve or other central banks would have issues.
"There are a set of issues around central Bank digital currencies that have to be examined," Yellen said. "What would be the impact on the banking system? Would it cause a huge movement of deposits out of banks and into the Fed? Will the Fed have to deal with retail customers or try to do this at a wholesale level, (given) their financial stability concerns? How would we manage money laundering and illicit finance issues, to consumer protection? But all said, it's absolutely worth looking at."
The Bank for International Settlements and seven central banks published in October a report laying out some key requirements for central bank digital currencies, or CBDCs.
They recommended that CBDCs compliment - but not replace - cash and other forms of legal tender and not harm monetary and financial stability.