The electric automotive manufacturing giant – Tesla has made an investment to the tune of $1.5 billion in Bitcoin – a digital currency, and have revealed its intention of accepting Bitcoin as payment for its vehicles.
According to CoinBase, this decision by Tesla has spurred the demand for Bitcoin as its price surged on the day of Tesla’s announcement by 15.4%. Having an interaction with the Securities and Exchange Commission, Tesla’s head and a business magnate – Mr. Elon Musk, revealed that, investing in digital currency and other alternative reserve assets was a strategy and believes that they will grow.
This decision by Tesla has created a furore among investors who are desirous of adding Bitcoin to their portfolio.
In an interview with Professor Anthony Michael Sabino by Time news magazine on the decision by Tesla, Prof. Anthony intimated that the decision taken by Tesla was prudent and that, a vehicle is a large purchase, which could make Bitcoin a better fit to pay for it. But the wild price swings in Bitcoin could be a significant risk to any merchant who decided to accept it.
“It was wise of Tesla to announce that it will deem its investment in Bitcoin as an “alternative asset.” That is certainly appropriate, because Bitcoin might be coming into greater acceptance as currency, but it is not cash,”
Prof. Anthony Michael Sabino.
Tesla said last month that it had cash and cash equivalents of $19.4 billion after selling new shares to take advantage of a rising stock price. Dan Ives of Wedbush Securities said the move gives Tesla “more flexibility to further diversify and maximize returns on its cash.”
Furthermore, information sourced from other experts by Time news say it is just a matter of time before Bitcoin finds more widespread use in transactions.
“I think the trend is inexorable,” said Richard Lyons, a finance professor at the University of California at Berkeley, predicting Bitcoin and other digital currencies “will become transactional currencies increasingly over the next five years. It’s not going to happen overnight.”
Cryptocurrencies in developing economies?
Digital currency – Bitcoin made its debut in 2009 and with it ushered a new era of cryptocurrency. Presently, tax authorities, enforcement agencies, and regulators worldwide are still debating best practices for rolling it out as a medium of exchange. Currently, the United States, Canada, Australia, and the European Union have allowed transactions on digital currency but not as a substitute for a country’s legal tender.
In developing countries like Ghana, cryptocurrencies are illegal and are not regulated. Nevertheless, anecdotal evidence by Elisha Owusu Akyaw, a Ghanaian-based cryptocurrency marketer and founder of BlockNewsAfrica told DW that there are transfers of cryptocurrency to and from Africa even though it is not regulated.
“Cryptocurrency basically takes what money is to many people and uses technology to make it more transparent and less centralized, so that everybody has a seat at the table when it comes to the future of finance,”
“Cryptocurrency basically work like mobile money so it’s easier for Africans to understand as opposed to people in the West who already had more financial inclusion and easy access to banking systems.”
Considering the fact that most people in developing countries are already transacting in digital currencies, will it be prudent for the regulators to make it legal, considering the risk that is associated with it – its volatility?
Read also: Bitcoin surges to highest level after PayPal shift to crypto
