Tesla considers crypto payments for EV sales following $1.5b Bitcoin purchase

Tesla Bitcoin Elon Musk
Tesla joins an increasing number of publicly listed companies storing Bitcoin on their balance sheet and integrating their business model with the emerging digital asset.

Tesla Inc magnate Elon Musk has hinted at a possible move to cryptocurrency payments for the company’s range of high-end electric vehicles after a filing to the US Securities and Exchange Commission revealed the company had acquired US$1.5 billion in Bitcoin.

News of the January purchase of Bitcoin was disclosed in Tesla’s annual report in which the company explained it had “updated our investment policy to provide us with more flexibility to further diversify and maximise returns” and allow it to invest in “alternative reserve assets including digital assets”.

The news follows a string of Twitter posts by Mr Musk to his 45 million followers showing his support of cryptocurrencies, including original blockchain proof-of-concept Bitcoin and its lesser known cryptocurrency Dogecoin.

The cumulative effect of those posts helped drive the price of the world’s most valuable cryptocurrency Bitcoin to a record high, adding more than US$100 billion to its market value while subsequently boosting the value of Tesla shares.

Tesla’s $1.5 billion Bitcoin spend represents about 8% of the $19.4 billion of the company’s cash and liquid assets at the end of December.

Bitcoin remains volatile

Popular but controversial Bitcoin remains a volatile asset which is still not widely used to pay for general goods and services but is seemingly preferred by those who distrust the central banking system.

Despite this, Tesla said it would consider a move towards incorporating Bitcoin as a payment method for its high-end electric vehicles, helping to further cement its status as the world’s best known cryptocurrency.

Tesla Bitcoin 2021 chart
Historical Bitcoin price chart measured in US dollars.

According to industry experts, the electric vehicle giant is in a unique position to accept digital currencies since – unlike traditional car companies – it does not rely on a network of independently-owned dealerships to sell its products.

“We expect to begin accepting Bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt,” Tesla said.

Other players

Tesla isn’t the first corporate player to convert a portion of its cash into Bitcoin, with US business analytics firm MicroStrategy announcing in August it would use some of the excess cash on its balance sheet to invest in alternative assets such as Bitcoin.

Last week, MicroStrategy’s chief executive officer Michael Saylor hosted a virtual conference to show corporate executives, directors and advisors how companies could incorporate Bitcoin into their operations and store it as a reserve asset on their balance sheet.

Could Apple be next?

Canadian analyst RBC Capital Markets is now wondering if global tech giant Apple Inc might be the next to follow Tesla’s lead, as part of a broader strategy which could potentially “turbocharge” the iPhone maker’s already fast-growing payments business.

In a recent research report, RBC suggested the world’s most valuable company could build a cryptocurrency exchange within its proprietary Apple Wallet to “immediately gain market share and disrupt the [crypto exchange] industry” and in doing so, dramatically increase its quarterly revenues.

Apple could “fund the entire operation, quite simply, by buying Bitcoin”.

“The wallet initiative appears to be a clear multi-billion dollar opportunity for the firm (with potential for well over $40 billion in annual revenue with limited research and development),” the report said.

“Apple would immediately gain market share if it were to enter the industry [and its] ecosystem would offer improved security relative to the companies that would be its competitors.”

Cautious approach

For its part, Apple has proceeded cautiously with cryptocurrencies.

In 2014, it banned cryptocurrency wallets from its App Store but later reversed the decision.

It has also banned mining for cryptocurrencies on iPhones and does not allow its Apple Card credit card to be used to purchase cryptocurrencies.

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