Why have leading global names started criticizing Bitcoin? I am asking after the latest criticism from Janet Yellen of the US?
Answer
Answer
Crypto currencies like Bitcoin have never been welcomed by the central banks and policy makers as it was seen to by intruding into the monetary policy management of the central banks. Several central bank heads have expressed such apprehensions even in the past and in most countries, it continues to operate only in the fringes. The issues has assumed importance after Bitcoin touched valuation of $1 trillion.
The latest criticism of Bitcoin as a currency and as an asset class has come from no less a person than the US Treasury Secretary Janet Yellen. Obviously, her view matters because, apart from being the Treasury Secretary in the current US government, she has also been the governor of the US Federal Reserve during the Obama and Trump regime.
Yellen has referred to Bitcoin as being highly speculative and inefficient for transactions and hence posing a major threat to the global financial market stability as well as to the global payments system. Cryptos undermine the ability of the central bank to regulate the financial system and in India the RBI has already put a ban on transactions in Bitcoin and other crypto currencies.
Additionally, Janet Yellen has referred to Bitcoins and other crypto currencies as being inefficient because the energy consumed in processing transactions was huge. These comments from Janet Yellen came in the midst of Bitcoin crashing 16% on the crypto exchanges after scaling a peak asset class valuation of $1 trillion. In the last one year, Bitcoin has had a frenetic rally and some are calling it an alternative to gold.
As an alternative to a loosely regulate Bitcoin, Janet Yellen has suggested that the US Federal Reserve should seriously explore the pros and cons of a digital dollar currency. Such a currency would be digital and yet reliable as it has the backing of the Fed. These comments assume importance as a few weeks earlier, even the ECB Chief, Christine Lagarde, had criticized cryptos as speculative and supporting illicit transactions.