Tesla Will No Longer Accept Bitcoin

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Elon Musk, founder of SpaceX and chief executive officer of Tesla Inc., arrives at the Axel Springer Award ceremony in Berlin, Germany, on Tuesday, Dec. 1, 2020. Tesla Inc. will be added to the S&P 500 Index in one shot on Dec. 21, a move that will ripple through the entire market as money managers adjust their portfolios to make room for shares of the $538 billion company. Photographer: Liesa Johannssen-Koppitz/Bloomberg via Getty Images

Tesla has suspended vehicle purchases using Bitcoin due to climate change concerns, its CEO Elon Musk said in a tweet.

Bitcoin fell by more than 10% after the tweet, while Tesla shares also dipped.

Tesla’s announcement in March that it would accept the cryptocurrency was met with an outcry from some environmentalists and investors.

The electric carmaker had in February revealed it had bought $1.5bn (£1bn) of the world’s biggest digital currency.

But on Thursday, it backtracked on its previous comments.

“We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,” Mr Musk wrote.

“Cryptocurrency is a good idea… but this cannot come at great cost to the environment.”

He also said the electric carmaker would not sell any of its Bitcoin and intends to use it for transactions as soon as mining shifts to using more sustainable energy.

Market analysts see the move as an attempt by Tesla to assuage the concerns of investors who are focused on climate change and sustainability.

“Environmental, Social and Corporate Governance (ESG) issues are now a major motivation for many investors. Tesla, being a clean energy-focused company, might want to work better in the environmental area of ESG,” Julia Lee from Burman Invest told the BBC.

“But a cynic might suggest that this is just another move by Elon Musk to influence the cryptocurrency market, as he has done on so many other occasions,” she added.

Elon Musk is hardly ill-informed when it comes to both technology and the environment. When I interviewed him in 2016 he spoke passionately about Tesla’s mission to make transport sustainable in the battle against the “existential threat” of climate change.

So it is somewhat surprising that he has only just woken up to the fact that Bitcoin is not exactly a green project. Cambridge University’s Centre for Alternative Finance runs a Bitcoin Electricity Consumption Index. Right now, it shows that the process of mining the cryptocurrency – which involves using vast amounts of computer processing power – uses more electricity each year than Malaysia or Sweden and is closing in on the annual consumption of Egypt.

Bitcoin enthusiasts insist that mining mainly involves renewable energy – in truth, the miners focus on whatever is cheapest and in China, where many of them are based, that is often electricity generated by coal.