Holders of Bitcoin may be able to cash in some
of their investment in the digital currency for a
brand new electric car.
Electric automaker Tesla said that it has invested
around $1.5 billion in Bitcoin and it plans to begin
accepting the digital currency as payment for its
high-end vehicles soon. The price of Bitcoin soared
20% to around $47,000 Monday in reaction to
Tesla’s announcement, according to CoinBase.
The California-based electric car maker headed
by Elon Musk revealed the new strategy in a filing
with the U.S. Securities and Exchange Commission,
saying its investment in digital currency and other
“alternative reserve assets” may grow.
Bitcoin has drawn enthusiasts for its scarcity and
security, but the volatile digital currency still is
not widely used to pay for goods and services.
It’s mostly been a store of value, like gold,
with some limited merchants like Overstock
accepting bitcoin for payment. It’s also used
by those distrustful of the banking system or
criminals seeking to launder money.
Whether other major companies will follow
Tesla’s lead in investing in Bitcoin or accepting
it for transactions is unclear. A vehicle is a large
purchase, which could make Bitcoin a better fit
to pay for it, but the wild price swings in Bitcoin
could be a significant risk to any merchant who
decided to accept it.
“It was wise of Tesla to announce that it
will deem its investment in Bitcoin as an
“alternative asset.” That is certainly appropriate,
because Bitcoin might be coming into greater
acceptance as currency, but it is not cash,” said
Anthony Michael Sabino, a professor of law, at
St. John’s University.