Tesla invests $1.5bn in Bitcoin and will accept cryptocurrency as payment

EV maker says it 'may acquire and hold digital assets' occasionally or in the long term

Tesla reported a 157 per cent year-on-year surge in Q4 net profit on the back of increased demand for its EVs. EPA

Tesla, the world's biggest electric vehicle company, said it will soon accept Bitcoin as payment for its electric vehicles and has invested $1.5 billion in the biggest cryptocurrency. 
The California-based company updated its investment policy last month to diversify assets and maximise its returns on cash holdings, it said in a statement to the US Securities and Exchange Commission on Monday.

As part of the new policy, Tesla aims to invest a portion of its cash in alternative assets including digital assets, gold bullion and gold exchange-traded funds.

"We invested $1.5bn in Bitcoin under this policy and may acquire and hold digital assets from time to time or long-term," Tesla said.

"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."

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Prices for the digital asset surged 15.35 per cent to $43,750 at 7.29pm UAE time after the news. Industry analysts are bullish and expect Bitcoin to touch the $65,000 mark.

Tesla’s investment in Bitcoin shows "it is a currency and it can be accepted for payment", argued Naeem Aslam, chief market analyst at brokerage Avatrade, adding, "There is nothing which is going to [stop] Bitcoin from rising now. The next stop is 50K and then we are moving towards the 65K."

"Bitcoin is heading towards the sky, another billionaire has come out and he has put his money where his mouth is … traders have been waiting for Elon Musk to make some big news and today the proof is out," he added.

In December, Nouriel Roubini, professor of economics at New York University's Stern School of Business and one of crypto's fiercest critics, said Bitcoin "doesn't have any fundamental value."

"Calling them cryptocurrencies is a misnomer ... to be a currency it has to be a unit of account, a scalable means of payment and a stable store of value," he said on Bloomberg TV.

"On all of these counts neither Bitcoin or any other cryptocurrency is a currency," Mr Roubini said. "Second, there is plenty of academic evidence suggesting that the price of Bitcoin has been manipulated ... and it doesn't have any intrinsic value."

In the SEC filing, Tesla also acknowledged the concerns associated with the trading of cryptocurrencies.

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Without centralised issuers, digital assets are subject to security breaches, cyber attacks, as well as human errors or computer malfunctions that may result in the loss of private keys needed to access such assets, the company said.

"While we intend to take all reasonable measures to secure any digital assets … if such threats are realised or the measures or controls we create to secure our digital assets fail, it could result in a partial or total misappropriation or loss of our digital assets, and our financial condition and operating results may be harmed," the company said. Tesla's stock was up 0.26 per cent at $852.23 per share on Monday.

Tesla, which temporarily suspended operations at each of its manufacturing facilities in the first half of 2020, said its business could be impacted by "macroeconomic conditions" resulting from the Covid-19 pandemic.

“We cannot predict the duration or direction of current global trends ... the sustained impact of which is largely unknown.”

“If current global market conditions continue or worsen, or if we cannot maintain operations at a scope that is commensurate with such conditions ... our business, prospects, financial condition and operating results may be harmed,” it added.

The company said it may also experience future delays in launching or ramping production of new vehicles and other products.

Tesla, which joined the S&P 500 index in December, delivered close to 500,000 vehicles globally last year. It aims to increase its production to more than 750,000 units this year.

Last month, Tesla reported a 157 per cent annual surge in fourth quarter net profit to $270 million on the back of increased demand for its electric vehicles.