Tesla has suspended customers’ use of bitcoin to purchase its vehicles, Tesla’s billionaire CEO said last week, citing concerns about the use of fossil fuel for bitcoin mining.Elon Musk said the company had suspended use of bitcoin for purchase of its electric vehicles, citing fears about the world’s biggest cryptocurrency’s “rapidly increasing use of fossil fuels”.
The company started accepting bitcoin in March. Musk tweeted that they plan to start using it again “as soon as mining transitions to more sustainable energy”. Following the tweet, bitcoin fell nearly 17% – its lowest point since the beginning of March. “We are also looking at other cryptocurrencies that use <1% of bitcoin’s energy/transaction,” Musk said.
How does bitcoin use fossil fuels? Bitcoin mining – the process by which the currency is created using high powered computers that compete to solve complex mathematical puzzles – is powered by electricity generated by fossil fuels, especially coal. At current rates, it is using approximately the equivalent amount of energy each year as the Netherlands did in 2019.
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.
Edward Moya, a senior market analyst at currency trading firm OANDA, said that Musk was getting ahead of investors focused on sustainability.
“The environmental impact from mining bitcoins was one of the biggest risks for the entire crypto market,” Moya said. “Over the past couple of months, everyone disregarded news that bitcoin uses more electricity than Argentina and Norway.”
Chris Weston, head of research at broker Pepperstone in Melbourne, said Musk’s reaction was a blow to bitcoin but an acknowledgement of the currency’s carbon footprint. “Tesla has got an image of being environmentally friendly and bitcoin clearly is the opposite of that,” Weston said.