Tesla’s CEO and Founder, Elon Musk, has announced that the company has suspended the use of Bitcoin as a valid payment method for its vehicles due to concerns about the use of fossil fuels for Bitcoin mining.
Musk’s announcement came in the form of a Tweet in which he stated that the company was “concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.”
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
— Elon Musk (@elonmusk) May 12, 2021
The announcement also states that Tesla is still committed to Bitcoin and will be keeping it in its portfolio with no plans to sell.
The company intends to use its holdings for transactions once that “mining transitions to more sustainable energy” but will be looking at other cryptocurrencies that use less than 1% of Bitcoin’s energy requirements per transaction.
The billionaire, who has been one of the most vocal defenders of cryptocurrency, also pointed out that crypto is “a good idea on many levels” and that the company still believes in its “promising future”, but the environmental concerns surpass that.
As a company that heavily markets to those concerned about the environment, Tesla received a lot of criticism from both the public and its shareholders for its investment and support of Bitcoin, which has quite controversial at the time.
A Drastic Change in Position by Tesla
The electric vehicle manufacturing company had originally made the news back in late March of 2021 when it started accepting Bitcoin payments for its different products, just 1 month after investing $1.5 billion in Bitcoin as an, “alternative reserve assets to provide flexibility in investments,” according to a Securities and Exchange Commission filing.
The cryptocurrency investment was seen as one of the causes of the record quarterly earnings that Tesla reported in April, the highest ever, accounting for $438 million. According to the New York Times, the $1.5 billion investment and the subsequent sale of part of the holdings boosted the revenue by over $101 million.
This positive effect on the coin’s impact on revenue was widely celebrated by the company, with Zach Kirkhorn, Tesla’s C.F.O stating that the move had proven to be a good decision.
The decision announced by Musk represents a drastic turn in the position of a company that has shown an increasing interest in cryptocurrencies, specifically Bitcoin, over the past months. While the reasoning is not surprising by itself given the Ethos of the company, such concerns could have easily been considered before the investment.
The Debate Around Bitcoin Mining’s Environmental Impact
Environmental concerns around the Bitcoin mining industry gained popularity over the past months as Cryptocurrency supporters and critics weighed in the debate. Pro-environmental and Bitcoin mining critics pointed out that the activity required more energy than the used by countries like Argentina.
News outlets like the New York Times published articles that gathered attention in different circles amid the Coinbase NASDAQ listing due to its claims that the mining of Bitcoin could allegedly push global warming over the Paris agreement threshold, as well as have a negative impact on national laws and pollution regulation.
While such claims were highly criticized by many experts, they were successful in putting the highlight in the industry and magnifying a debate that has been taking place for a long part of the coin’s recent history.
Back in April, the CITI group also published a report in which the company shared its belief that environmental concerns would at the, “very least it may deter some investors from holding Bitcoin and it could spur government intervention to ban mining, as seen in parts of China.”
During the same month, companies like Square joined the debate by stating that Bitcoin could have a positive impact on the environment by promoting the use of renewable energy sources such as eolic and hydroelectric energy, which already accounts for a big part of the industry’s energy consumption.