Tesla Inc has suspended the use of bitcoin to purchase its vehicles because of climate concerns, Chief Executive Officer Elon Musk said in a tweet on Wednesday (May 12), reversing the company's stance in the face of an outcry from some environmentalists and investors.
Bitcoin, the world's biggest digital currency, fell more than 7 per cent after the tweet and was trading at US$52,669. Tesla Inc revealed in February it had bought US$1.5 billion of bitcoin and would soon accept it as payment for cars, driving a roughly 20 per cent surge in the world's most widely held cryptocurrency.
Musk on Wednesday said Tesla would not sell any bitcoin, and intends to use bitcoin for transactions as soon as mining transitions to more sustainable energy.
"We are also looking at other cryptocurrencies that use <1% of bitcoin's energy/transaction," Musk said.
Musk said in March that customers can buy Tesla's electric vehicles with bitcoin.
The digital currency is created when high-powered computers compete against other machines to solve complex mathematical puzzles, an energy-intensive process that currently often relies on electricity generated with fossil fuels, particularly coal.
At current rates, such bitcoin “mining” devours about the same amount of energy annually as the Netherlands did in 2019, the latest available data from the University of Cambridge and the International Energy Agency shows.
Some investors cast doubt on Tesla's plans months ago.
"We are of course very concerned about the level of carbon dioxide emissions generated from bitcoin mining," said Ben Dear, CEO of Osmosis Investment Management, a sustainable investor managing around US$2.2 billion in assets that holds Tesla stock in several portfolios, in February, shortly after Tesla's holdings became public.
Musk himself is a strong believer in digital currencies, but also advocates for clean technology.
"Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment," Musk said.
In theory, blockchain analysis firms say, it is possible to track the source of bitcoin, raising the possibility that a premium could be charged for green bitcoin. Stronger climate change policies by governments around the world might also help.
Some bitcoin proponents note that the existing financial system - with its millions of employees and computers in air-conditioned offices - uses large amounts of energy too.