Jack Dorsey is a Bitcoin enthusiast
Silicon Valley’s love affair with Bitcoin stepped up a gear on Wednesday after Twitter said it could follow Tesla’s lead with a major investment in the digital currency.
Twitter’s finance chief Ned Segal said the firm is watching Tesla’s move closely and had long considered buying Bitcoin.
The firm is also looking at whether it can use the so-called cryptocurrency to pay vendors, or even its own employees.
The move sparked fresh hopes among bitcoin enthusiasts that the currency is on the brink of mainstream acceptance – something which could in turn spark a fresh crackdown by regulators concerned by its wild price swings and reputation for money laundering.
It follows a $1.5bn (£1.1bn) investment by Tesla representing about 7.7pc of the car company’s cash on hand at the end of 2020.
In an interview with CNBC, Mr Segal said Twitter had done "a lot of upfront thinking" about the possibility of paying employees or suppliers in Bitcoin.
He said: "One of the key things we’d look at would be if people were asking to transact with us in Bitcoin, because then we might consider whether we would be transferring dollars to Bitcoin at the time of the transaction, or if we wanted Bitcoin on our balance sheet, ready to complete that transaction.
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"When we do business in another country, when we think about the different exposures that we have, we’re trying to match our assets and our liabilities, and we take the same approach to Bitcoin."
It came as Twitter’s chief executive Jack Dorsey donated $1m (£720,000) to Coin Center, a think tank in Washington DC devoted to political advocacy of digital coins. Mr Dorsey’s other company, the payments provider Square, also allows users to pay in Bitcoin and has almost $212m.
Tesla’s bitcoin investment gives it the second largest Bitcoin hoard of any public company, according to the tracking website Bitcoin Treasuries, and was the biggest ever punt in terms of US dollars exchanged.
Shares in Microstrategy, a business intelligence firm that is top of the Bitcoin value league table due to its policy of keeping all spare cash in the currency, have soared by as much as 199pc since the start of the year.
At least 19 public companies now have substantial Bitcoin holdings according to Bitcoin Treasuries. The cryptocurrency-focused merchant bank Galaxy Digital has $738m, while Marathon Patent Group has $217m and Bitcoin miner Hut 8 has $132m.
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Gavin Brown, a senior lecturer in financial technology at the University of Liverpool, said the size of Tesla’s stake goes well beyond the 1-3pc traditionally recommended by crypto investors, and will probably provoke action from the US Securities and Exchange Commission (SEC) if other companies take the same approach.
Mr Brown said: "If Bitcoin suddenly goes up by a factor of ten, or even a factor of two or three, and a company has got a material amount of Bitcoin in its reserve, that volatility will then spill over into its share price.
"Let’s say Tesla has half of our reserves in Bitcoin, which could easily be a scenario this time next year; if Bitcoin suddenly tanks, that’s going to then have an influence on the Tesla share price, which then affects the capital markets.
"That then means the SEC is not just interested, but very interested… that is probably going to force the SEC hand to try and put some kind of curtailment on that."
Mr Brown suggested that regulators might seek to cap companies’ Bitcoin investments at 10pc of their total cash reserves.
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