February 4, 2023

Tesla has put almost 8% of its reserves into the cryptocurrency.

As per Form 10-K, on page 23, TESLA states, “In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity. As part of the policy, which was duly approved by the Audit Committee of our Board of Directors, we may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds and other assets as specified in the future. Thereafter, we invested an aggregate $1.50 billion in bitcoin under this policy and may acquire and hold digital assets from time to time or long-term. Moreover, 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.

Key points from the above statement to be highlighted are:

  1. TESLA expects to begin accepting Bitcoin as a form of payment for products in the near future
  2. Digital assets in general and Bitcoin specifically is accepted as an alternative reserve asset.

TESLA recognises the following risk factors for holding digital assets which are important considerations for all interested in investment such assets:

  • The prices of digital assets have been in the past and may continue to be highly volatile, including as a result of various associated risks and uncertainties. For example, the prevalence of such assets is a relatively recent trend, and their long-term adoption by investors, consumers and businesses is unpredictable.
  • Digital assets lack of a physical form, their reliance on technology for their creation, existence and transactional validation and their decentralization may subject their integrity to the threat of malicious attacks and technological obsolescence.
  • The extent to which securities laws or other regulations apply or may apply in the future to such assets is unclear and may change in the future. 
  • Digital assets are currently considered indefinite-lived intangible assets under applicable accounting rules,
  • Finally, as intangible assets without centralized issuers or governing bodies, digital assets have been, and may in the future be, subject to security breaches, cyberattacks or other malicious activities, as well as human errors or computer malfunctions that may result in the loss or destruction of private keys needed to access such assets.

Tesla’s $1.5 billion investment in bitcoin could also be a simple hedge against the hegemony of the U.S. dollar as the world’s reserve currency since World War Two – Market Watch

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