Tesla’s Move On Bitcoin And A Potential AML Motivation

I view yesterday’s announcement in a similar light. Yes, the company is accurate in saying that it will not accept an environmentally unfriendly currency as a means of exchange, but I believe that the motivation is being obscured. As I wrote in the wake of the Coinbase offering, bitcoin found its original use case as a means of facilitating illicit transactions. While a wide range of companies now accept bitcoin as a legitimate store of wealth and means of exchange, there are undoubtedly many who still use it for more nefarious purposes. That use case could be creating an inadvertent anti-money-laundering (AML) problem for TSLA.

As a regulated person in the financial services industry, I have attended regular AML training. And yes, I’ve paid attention. The Financial Crimes Enforcement Network (FINCEN) of the US Treasury Department defines money laundering this way:

Money laundering is the process of making illegally-gained proceeds (i.e. “dirty money”) appear legal (i.e. “clean”). Typically, it involves three steps: placement, layering and integration.

Each of those steps is intentionally difficult, deliberately creating obstacles for a criminal to spend his illicit profits, whether in bitcoin or cash. If one could use his bitcoin to directly purchase an expensive auto, that would make the process of integration a little easier. I suspect that this ability to buy Teslas with bitcoin caught the attention of someone at FINCEN as a potential loophole in AML activity.

To be crystal clear: I am NOT accusing Elon Musk or Tesla of facilitating money laundering! What I am suggesting is that the company was quietly warned that any sales of cars for bitcoin would be subject to major scrutiny. Considering that TSLA barely breaks even on car sales (the vast majority of its profits come from the sale of regulatory credits, and now bitcoin), any incremental hassle would simply not be worthwhile. It’s also not clear that they have even sold any cars for bitcoin anyway. FINCEN inquiries need to be confidential, so yesterday’s announcement would serve the dual purposes of changing behavior without revealing the regulatory catalyst for the change while at the same time putting an environmentally friendly spin on it.

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