Experts said they would not be surprised by a closer look from regulators given Musk’s bumpy past with watchdogs.
The Securities and Exchange Commission sparred with Musk and Tesla several times over his use of Twitter to discuss the company,ultimately resulting in his exit as company chairman and a pair of $US20 million fines for Musk and Tesla.
“We’re talking about a billionaire with one of the most valuable companies in the history of the world who has seemingly gotten away with poking the SEC before,” said Tyler Gellasch,head of the Washington-based Healthy Markets Association and former SEC official. Still,Gellasch said that “examination doesn’t mean this is likely to be an enforcement case.”
Tesla said in a filing the decision to move nearly 8 per cent of its reserves into bitcoin was part of its broad investment policy as a company aimed at diversifying and maximising its returns on cash,including holding gold. The report said it ended 2020 with $US19.38 billion in cash and cash equivalents.
“We expect to begin accepting bitcoin as a form of payment for our products in the near future,subject to applicable laws and initially on a limited basis,which we may or may not liquidate upon receipt,” the company said.
Tesla said it had invested an aggregate $US1.5 billion in bitcoin under the changed policy and could “acquire and hold digital assets from time to time or long-term”. Shares of the company rose 1.3 per cent Monday.
Gold jumped more than 1 per cent Monday while ethereum,another cryptocurrency,surged to a record high.
Long-term store of value?
Central banks remain sceptical of digital currencies,but analysts say the more real world uses appear for bitcoin,the more attractive it will prove as a long-term store of value.
Bitcoin surged nearly 16 per cent to a record high of $US44,080 after Tesla’s disclosure. The cryptocurrency is up nearly 350 per cent over the past 12 months,thanks in part to interest from institutional investors.
“The argument for bitcoin is evolving. It used to be negative (reasons to buy),but suddenly there are positive reasons,and that’s why you see bitcoin at (new highs),” Mohamed El-Erian,chief economic advisor of Allianz,toldCNBC.
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Tesla is the latest company to add bitcoin to its corporate treasury,following similar moves by Square,the payments company led by Twitter chief Jack Dorsey and US software firm MicroStrategy.
Apple Inc may be the next big company to enter the cyrptocurrency market,both by allowing bitcoin to be exchanged on its Apple Wallet service and investing some of its own reserves in units of the cryptocurrency,said Mitch Steves,an analyst at RBC Capital Markets.
“If this becomes a trend in corporate treasuries the downside of staying on the sidelines will only become costlier over time,” said Maya Zehavi,a blockchain consultant.
Tesla’s move to put some of its corporate reserves in bitcoin may be a signal that it expects the cryptocurrency will emerge as another store of long-term value alongside the dollar and gold,said Graham Tanaka,president and chief investment officer of Tanaka Capital Management in New York.
“Companies are very careful when it comes down to their reserves,” he said. “This doesn’t appear to be a flash in the pan. It appears to be something that may be a fundamental change.”
Reuters
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