Employees work on bitcoin mining computers at Bitminer Factory in Florence, Italy.
Alessandro Bianchi | Reuters
Elon Musk is known for a brain that combines the capabilities of a rocket-science supercomputer and self-driving algorithm, an ability to see the future that has paid off in one of the world’s biggest billionaire fortunes, and market’s largest companies, by being ahead of others in taking risks on going to Mars, electric cars and, long before that, a first big idea, finding and paying for things on the internet. But that doesn’t mean that on bitcoin, which Musk bought for Tesla‘s balance sheet earlier this year and profited from in the first quarter, he is out ahead in a way that other executives should be following.
He’s been merely keeping pace with retail investors from the Robinhood trading crowd and companies like MicroStrategy and Square, which were invested in bitcoin on their balance sheets before Tesla. Now, in citing the climate risks of bitcoin this past week as a reason to suspend the ability of Tesla customers to use the cryptocurrency as a payment method, Musk was entering a debate over the climate implications of bitcoin that isn’t news to anyone who has followed the market for years.
To experts who advise corporations, and to a growing group of chief financial officers, Musk’s back-and-forth on bitcoin does speak to real issues: Should more corporations be adding bitcoin to the balance sheet? Should they be staying away from bitcoin due to concerns including the energy consumption required to mine it contradicts growing ESG commitments to climate change?
The answers: maybe “no” and “no.” Starting with climate.
Martin Whittaker, CEO of ESG market specialist, JUST Capital, which focuses on holding companies accountable on issues like carbon emissions, said climate criticisms of bitcoin are easy to make, but can be oversimplified. “I’ve seen the numbers on the carbon footprint equal to Sweden or New Zealand and the truth is it depends on how the power is generated. … If you mine it all from bituminous coal that’s going to give you one level of carbon intensity, but if it comes from clean power it is a totally different footprint. … Cryptocurrency can be a big opportunity for anyone who cares about clean energy,” Whittaker said on a CNBC Global CFO Council virtual event this past Thursday.
In Musk’s defense, his comments on the energy intensity of mining were also a call to action for the crypto industry to focus on creating efficient operations. But it still had leaders in the crypto space, who have been involved for over a decade, scratching their heads.
“I don’t understand why he said that, because I would expect him to understand how mining works,” said Wences Casares, CEO of digital bank and bitcoin custodian Xapo, at the same CNBC CFO event.
What chief financial officers and corporations need to be doing, according to several corporate finance and crypto experts, is stay away from the distractions and focus on learning about cryptocurrency before they are potentially left behind by a fundamental transformation in the way funds move around the world.
Data from a recent CNBC survey shows that more company finance chiefs are taking bitcoin seriously. A survey of the CNBC Global CFO Council conducted in March found a big increase in chief financial officers who say bitcoin is for real — the percentage doubled to over 50% since the last time CNBC asked CFOs this question in 2017. Among U.S.-based CFOs, specifically, the percentage saying bitcoin is for real doubled as well, from 33% to 65%. But most CFOs around the world, over 80%, also believe bitcoin is in a bubble and should not be accepted as a source of payment or held on the balance sheet.
Casares says bitcoin believers benefitted from Musk putting the cryptocurrency on the balance sheet as it raised general awareness, but it is not clear to him why that is a good move for a Tesla shareholder, especially with Musk now saying it will no longer be allowed for transactions. “It feels speculative to me. He wasn’t buying gold before,” the bitcoin bank CEO said.
In fact, Casares says a CFO who holds the view that bitcoin should not be a balance sheet holding is the one taking the correct view.
“I don’t think there is a prescient need if you are CFO of…