The world’s most powerful financial leader, Janet Yellen, took sides with the Central Bank of Nigeria (CBN) by warning investors and the public of the dangers of owning Bitcoin.
The U.S Treasury Secretary and custodian of the $20 trillion economic juggernaut, raised her concern that the world’s most popular crypto asset could be ideal for money laundering and illicit transactions.
“I don’t think that bitcoin … is widely used as a transaction mechanism,” she told CNBC’s Andrew Ross Sorkin at a DealBook conference. “To the extent, it is used I fear it’s 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 is staggering.”
The Nigerian central bank, some weeks back, spoke on the fact that some of these cryptos were issued by unregulated and unlicensed entities which begged the question of legality. It also claimed that cryptocurrencies had been used to finance several illegal activities including terrorism and money laundering.
“The question that one may need to ask therefore is, why any entity would disguise its transactions if they were legal. It is on the basis of this opacity that cryptocurrencies have become well-suited for conducting many illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion,” the CBN said in a statement.
At the time of drafting this report, Bitcoin traded at $52,040.95 with a daily trading volume of $90.6 Billion. Bitcoin is down 8.55% for the day.
The CBN had earlier disclosed that a significant amount of people used it for speculative purposes rather than payment, citing the flagship crypto model as an example.
“More also, repeated and recent evidence now suggests that some cryptocurrencies have become more widely used as speculative assets rather than as means of payment, thus explaining the significant volatility and variability in their prices.
“Because the total number of Bitcoins that would ever be issued is fixed (only 21 million will ever be created), new issuances are predetermined at a gradually decelerating pace,” the CBN said.
Taking the same side with Africa’s most powerful financial regulator, Yellen raised concerns about its usual high price swings that often come to cost some investors their fortune.
“It is a highly speculative asset and you know I think people should be aware it can be extremely volatile and I do worry about potential losses that investors can suffer,” Yellen said.
Nigeria’s apex bank re-emphasized its responsibility to protect investors from a high probability of losses that might arise from dealing in cryptos.
The CBN said it would continue to educate Nigerians on the disadvantages of cryptos in the financial system.
“Due to the fact that cryptocurrencies are largely speculative, anonymous, and untraceable, they are increasingly being used for money laundering, terrorism financing, and other criminal activities. Small retail and unsophisticated investors also face a high probability of loss due to the high volatility of the investments in recent times.
“In light of these realities and analyses, the CBN has no comfort in cryptocurrencies at this time and will continue to do all within its regulatory powers to educate Nigerians to desist from their use and protect our financial system from the activities of fraudsters,” the Nigerian apex bank said.
The former U.S Fed Chief however believed that a new digital currency, along with a payments system, would come into play in the coming years.
“I think it could result in faster, safer, and cheaper payments, which I think are important goals,” Yellen said.