Goodbye, Fiat: Tesla’s Investment in Bitcoin

By Adelina Budulan​

The Story

Tesla has invested US$1.5 billion in bitcoin and announced its intention to accept the infamous cryptocurrency as payment for its products in the future (Financial Times). The move prompted the price of bitcoin to surge to a then record-high – over US$44,000 per bitcoin (The New York Times). In a regulatory filing, the automaker revealed that it had updated its investment policy to allow for “more flexibility to further diversify and maximise returns” (United States Securities and Exchange Commission). Tesla is the first S&P 500 company to venture into bitcoin (Investopedia) and the second largest corporate bitcoin-owner, with the top spot held by software company MicroStrategy (Bloomberg). It appears that Tesla’s headline-grabbing venture into bitcoin may be the catalyst for other businesses to engage in similar investments.

What It Means For Businesses And Law Firms

Other companies are contemplating bitcoin investments of their own or actually following in Tesla’s footsteps. Twitter’s CFO, Ned Segal, reacted positively to the automaker’s announcement, suggesting that his company may also dabble in bitcoin in the future (CNBC). BNY Mellon, America’s oldest bank, announced its own bitcoin investment in the same week as Tesla (Forbes). For their part, retail investors will now be exposed to bitcoin when acquiring shares in Tesla or the S&P 500, further strengthening the cryptocurrency’s potential to become mainstream.

As more companies look to invest in bitcoin, law firms may be called upon to advise on bond issuances as the current climate renders debt capital markets an attractive source of financing. For example, MicroStrategy issued US$650 billion worth of bonds to finance its bitcoin investments in December 2020 (Bloomberg). Moreover, if the cryptocurrency space, as a whole, increases in popularity, new players will seek to create new products. Law firms may be called upon to advise on Initial Coin Offerings (ICOs) – “the cryptocurrency industry’s equivalent to an initial public offering (IPO)” (Investopedia).

“As the industry goes, so go their regulators” (Lexology). Central bankers, including Christine Lagarde and Andrew Bailey, are already sceptical of cryptocurrencies, which indicates that efforts to regulate and supervise the industry might hasten in the near future. Law firms may be called upon to help eager investors navigate the prospective changes to the regulatory framework surrounding cryptocurrencies.

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