American electric car and battery maker Tesla’s CEO Mr. Elon Musk’s decision to stop accepting bitcoin as payment due to environmental issues has been well received by some Tesla investors, serving as a cautionary note to corporate peers pondering the use of cryptocurrency.
Mr. Musk’s tweets which had helped propel some of bitcoin’s recent gains, sparked a 17 percent drop in the cryptocurrency’s value this week when he declared his company’s customers would no longer be able to buy cars using bitcoin.
Mr. Musk expressed his concerns over the amount of energy required to “mine” bitcoin, much of which is done in China using cheap, climate-destroying thermal coal. He stated that if the situation changes, Tesla may reconsider its decision.
Bitcoin is created when high-powered computers compete to solve complicated mathematical riddles, an energy-intensive process.
According to reports, more than a half-dozen Tesla investors are pleased with Mr. Musk’s decision on bitcoin.
Tesla investor and APG Asset Management Chief Investment Officer Mr. Peter Branner remarked that “the energy waste should be avoided regardless of its color. And Tesla should focus on its core business. Drop the bitcoin position and move on.”
According to a 2019 study published in the scientific journal Joule, bitcoin mining consumes roughly the same amount of energy annually as the Netherlands did in 2019, data from the University of Cambridge and the International Energy Agency, generating between 22 million and 22.9 million metric tonnes of carbon dioxide emissions per year.
Mr. Guillaume Mascotto, Head of Environmental, social and corporate governance (ESG) and Investment Stewardship at American Century Investments, a top-40 Tesla investor stated that a company’s decision to invest in bitcoin would have an impact on how they were seen.
“It would affect our ESG risk views on payment companies and other firms taking large positions in crypto especially if it contributes to ‘engineering’ their bottom-lines as we saw with Tesla,” Mr. Mascotto concluded.
Warning note
A UK-based investor stated that Musk’s turnaround demonstrated the capacity of consumer and investor discontent to force change, increasing broader recognition of the carbon footprint buried in cryptocurrencies.
“Tesla decided to make a big statement about bitcoin in February and it did not pan out that well, so this is a warning shot to those who might be considering integrating some cryptocurrency into their strategy,” the investor added.
Several investors have stated that ESG rating organizations should do more to highlight the risks linked with cryptocurrency.
