Tesla buys $1.5bn in bitcoin, plans to start accepting it as payment

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.

Elon Musk

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.

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