American electric car and battery maker Tesla’s Chief Executive Officer Mr. Elon Musk has announced that the company would no longer allow bitcoin for car purchases, citing long-standing environmental issues as the reason for the swift shift in the company’s stance on cryptocurrency.
Bitcoin dropped more than 10 percent after Mr. Musk tweeted his decision to stop using it, less than two months after Tesla started accepting the world’s largest digital currency as payment.
Other cryptocurrencies, such as Ethereum, have dropped in value before regaining some ground in Asia trade.
The use of bitcoin to purchase Tesla’s electric vehicles demonstrated a contradiction between Mr. Musk’s environmentalist reputation and the use of his popularity and stature as one of the world’s richest people to back cryptocurrencies.
Some Tesla investors, along with environmentalists have been highly critical of the way bitcoin is “mined” with massive amounts of fossil-fuel-generated electricity.
Mr. Musk backed up the concern on the last day, citing the use of “coal, which has the worst emissions of any fuel.”
“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,” Mr. Musk tweeted.
Tesla revealed in February that it had purchased $1.5 billion in bitcoin before accepting it as payment for cars in March, causing the cryptocurrency to rise by roughly 20 percent.
Mr. Musk said that Tesla would keep its bitcoin holdings, to use the cryptocurrency until mining shifts to more sustainable energy sources.
Months ago, some investors doubted the use of bitcoin for Tesla purchases.
Mr. Ben Dear, Chief Executive Officer Osmosis Investment Management, UK said that shortly after Tesla’s bitcoin holdings became public, that “we are of course very concerned about the level of carbon dioxide emissions generated from bitcoin mining.”
Osmosis, a sustainable investment firm with $2.2 billion in assets under management, has Tesla stock in many portfolios.
Mr. Mark Humphery-Jenner, an Associate Professor of Finance at the University of New South Wales, said he was more worried about Tesla’s hasty decisions because environmental concerns were well-known “before Tesla accepted bitcoin.”
Some bitcoin supporters point out that the current financial system, with its millions of workers and computers in air-conditioned buildings, consumes a lot of energy as well.
Mr. Musk said that he is still a strong believer in cryptocurrencies.