CRYPTO MOVERS AND PRICES
Crypto was broadly and aggressively selling-off this morning. Spot volumes were 60% above the 30-day average.
Crypto Story of the Day
On Tuesday, Tesla CEO Elon Musk tweeted that the automaker has begun accepting BTC as a means for payment for cars in the U.S. The announcement comes on the back of Fed Chairman Jerome Powell’s Monday remarks that BTC isn’t used as a means of payment and serves as a “substitute for gold rather than the Dollar.”
In early February when Tesla announced it had purchased 1.5 billion equivalent of BTC, it also revealed plans to accept BTC as a payment in the future. In an SEC filing, Tesla indicated “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.”
However, according to Musk’s tweets, “[BTC] paid to Tesla will be retained as Bitcoin, not converted to fiat currency.” Musk also revealed that “Tesla is using only internal [and] open source software [and] operates [BTC] nodes directly.”
On Monday, at a Bank for International Settlements conference, Powell was pressed on whether U.S. efforts aimed at studying the feasibility of a digital dollar are a response to BTC and crypto. Powell’s response dismissed the use of BTC as a form of payment and remarked that BTC is a substitute for gold, not the dollar.
Other U.S. officials have also been dismissive over BTC as a means of payment. For example, Treasury Secretary Janet Yellen said in February, “I don’t think that bitcoin… is widely used as a transaction mechanism… To the extent it is used, I fear it’s often for illicit finance.”
Yesterday, U.S. Senator Mike Crapo tweeted a link to an article about Tesla accepting BTC, noting, “States are hamstrung right now. They can’t do anything until Treasury gives them guidance. These ‘thorny’ questions need to be answered by [US Treasury] as soon as possible.”
Some of the recent household-name firms that have adopted BTC and crypto; such as MasterCard, Visa, and PayPal; have incorporated the “use of” as a means of payment in their business models. For example, in a Q1 2021 earnings call, CEO Al Kelly said the firm is “uniquely positioned to help make cryptocurrencies more safe, [useful,] and applicable for payments…” and broadly described plans to allow users to “cash out onto our Visa credential to make a fiat purchase…”
The Tesla announcement directly challenges the consensus regulatory perspective that BTC is a “speculative store of value” and not a payment mechanism. Some regulators have already shown skepticism of that view. Former SEC Chairman Jay Clayton said in a 2019 interview, “Our current payment mechanisms...have inefficiencies. Those inefficiencies are the things that are driving the rise of [BTC].”
It’ll be hard for the former officials to maintain prior views if Tesla’s, and other firms’, use of BTC for payments gains traction and, as a result, could necessitate a shift in regulatory focus and narrative.