By Salim Yunusa
Tesla has acquired around $1.5 billion in Bitcoin under an investment policy at the electric car maker headed by Elon Musk, and it plans to begin accepting the digital currency as payment for vehicles soon.
The California company revealed the new strategy in a filing with the U.S. Securities and Exchange Commission early Monday, saying its investment in digital currency and other “alternative reserve assets” may grow.
Bitcoin spiked 14% and appeared to briefly hit a new all-time high. Shares of Tesla moved higher as well.
In its fourth-quarter earnings report last month Tesla said it had cash and cash equivalents of $19.4 billion.
Palo Alto-based Tesla reported its first annual net profit in 2020, but once again the company needed regulatory credits purchased by other automakers in order to achieve it. Without $1.58 billion in credits for the year, Tesla would have lost money.
In a year that saw its stock soar to make it the world’s most valuable automaker, Tesla earned $721 million, capped by a $270 million profit in the fourth quarter. It was the company’s sixth straight quarterly net profit after years of mostly losses.
Tesla faces challenges this year from traditional automakers, which are rolling out more electric vehicles.
Tesla’s meteoric stock price rise has generated big payoffs for Musk, making him one of the world’s richest people.
It’s been a wild ride for Bitcoin since it made its Wall Street debut in December 2017. Major futures exchanges rolled out bitcoin futures, pushing it to roughly $19,300, a then-unheard of price for the currency. It evaporated quickly in 2018, and by December of that year Bitcoin was worth less than $4,000 a coin. Up until the most recent rally, which started in October, Bitcoin generally floated between $5,000 and $10,000.
While in the last two years companies have embraced the technology that underlies digital currencies like Bitcoin, a concept known as the blockchain, the actual uses for Bitcoin have not really changed since its rally three years ago. It’s still largely used by those distrustful of the banking system, criminals seeking to launder money, and for the most part, as a store of value.
But the dominoes could be falling if major companies follow Tesla’s lead and begin accepting the digital currency as payment.
This came just three days after the Central Bank of Nigeria ordered financial institutions in the country to reject cryptocurrency transactions and block any related accounts.
It said in a statement on Sunday that the digital currency is used for money laundering and terrorism.
The decision has sparked outrage from mostly young people in a country that is the world’s second-biggest user of virtual currencies like Bitcoins.
The statement by Osita Nwanisobi, Acting Director, Corporate Communications, said the ban on such transactions will not have any negative impact on fintech.