Barely 24 hours days after the Central Bank of Nigeria (CBN) reaffirmed its ban on financial institutions to desist from transacting in cryptocurrencies over safety concerns, the California, United States-based electric vehicle and clean energy company, Tesla announced, Monday, it has bought $1.5 billion worth of bitcoin.
Tesla is owned by the world’s richest man, Elon Musk.
In a filing with the Securities and Exchange Commission, the company said it bought the bitcoin for ‘more flexibility to further diversify and maximize returns on our cash.’
Tesla also said it will start accepting payments in bitcoin in exchange for its products which would make the company the first major automaker to accept do so.
The moves raised immediate questions around CEO Musk’s behavior on Twitter recent weeks, where he has been credited for increasing the prices of cryptocurrencies like bitcoin and dogecoin by posting positive messages that have encouraged more people to buy the digital currencies.
Two weeks ago, the billionaire Tesla owned added the hashtag #bitcoin to his Twitter bio, in a move that helped to briefly push up the price of the cryptocurrency by as much as 20 percent. Two days later, he said on the social medial chat site Clubhouse: “I do at this point think bitcoin is a good thing, and I am a supporter of bitcoin.”
Bitcoin prices surged to new highs Monday following Tesla’s announcement, reaching a price of at least $44,200. Tesla shares were up more than 2.5 percent in premarket trading. Tesla warned investors of the volatility of bitcoin’s price in its SEC filing.
Tesla’s move into bitcoin represents an investment of a significant percentage of its cash in the investment. The company had more than $19 billion in cash and cash equivalents on hand at the end of 2020, according to its most recent filing.
Elon Musk in January, this year became the world’s richest person with a wealth put at $188 billion.
A statement by the CBN’s Acting Director, Corporate Communications, Osita Nwanisobi, weekend, warned that transactions in cryptocurrencies, noting that central banks, international financial institutions, and distinguished investors and economists have also warned against its use.
“They have all made similar pronouncements based of the significant risks that transacting in cryptocurrencies portend-risk of loss of investments, money laundering, terrorism financing, illicit fund flows and criminal activities,” the statement read.
The CBN also cited other countries where the transaction is illegal to buttress its position.
“China, Canada, Taiwan, Indonesia, Algeria, Egypt, Morocco, Bolivia, Kyrgyzstan, Ecuador, Saudi Arabia, Jordan, Iran, Bangladesh, Nepal and Cambodia have all placed certain level of restrictions on financial institutions facilitating cryptocurrency transactions,” it said.
Further explaining the rationale for the restriction on cryptocurrency transactions by banks, the CBN said it was aimed at protecting ‘the financial system and the generality of Nigerians (including the youth population) from the risks inherent in crypto assets transactions, which have escalated in recent times, with dire consequences for the integrity of the financial system and financial stability.’
“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 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 its use and protect our financial system from activities of fraudsters and speculators,” the apex bank stated.