Last Tuesday, Tesla CEO Elon Musk announced that it is now possible to purchase Tesla vehicles with Bitcoin in the U.S. The self-proclaimed “Technoking” revealed this news through Twitter and tweeted, “You can now buy a Tesla with Bitcoin.” The payment procedures have also been updated on the support page on Tesla’s website with further information on the transaction.
Following Tesla’s disclosure of buying $1.5 billion in Bitcoin through a filing with the Securities and Exchange Commission (SEC), Musk has embraced the use of digital currency more than any other tech CEO. With his positive tweets, the cryptocurrency market has seen increases in prices like Bitcoin and Dogecoin that have encouraged people to adopt digital currencies. When asked about their decision to incorporate Bitcoin as a payment option, Musk explained that Bitcoin would add “more flexibility to further diversify and maximize returns on our cash.”
In addition to the payment process, Tesla will hold the digital currency rather than converting it back to dollars in internal transactions. With Tesla’s guideline of reserving the rights to refund customers in either U.S. dollars or Bitcoin, they would benefit from price swings in the cryptocurrency market. Not only will they be the first automaker to adopt the digital currency, but “having this will also give Tesla liquidity in the cryptocurrency market,” according to CNBC.
Though this marks a historical moment in the automaker industry, some complications follow. For instance, due to IRS regulations, cryptocurrency is treated as property. This means that when you use it to buy goods or services, it is a taxable event. According to senior policy analyst at the Tax Foundation, Garrett Watson, “It’s really important to know the cost basis of any cryptocurrency – the value when you bought it – and the timing of that.” In other words, if one were to own cryptocurrency for less than a year, then they would be subject to paying short-term capital gains tax and potentially be pushed to a higher tax bracket. Contrarily, if it is owned for more than a year, it would be subject to the discretion of long-term capital gains tax.
Furthermore, this move has been criticized by many environmental-activists due to Bitcoin’s history of creating a “colossal” carbon footprint. In discussion with The New York Times, Bill Gates stated, “Bitcoin uses more electricity per transaction than any other method known to mankind, and so it’s not a great climate thing.” In contrast to Tesla’s image of an environmentally friendly auto provider, this move raises the alarm amongst some as Bitcoin requires a lot of carbon emission to mine the digital currency, which adds up.
Despite receiving flak towards his decision, Musk stands tall with the future of cryptocurrency. As an emerging sector with many mysteries, digital currency provides many discoveries to be found and used: a risk that the “Technoking” is willing to take.
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