Musk cited the environmental impact of bitcoin mining for the decision.
“Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emission of any fuel.”
Musk added that Tesla won’t be selling any of the bitcoin it holds. He said the company was looking at other cryptocurrencies that use far less energy per transaction.
The increasing complexity and length of the bitcoin algorithm requires ever more extensive computing power to "mine" new coins. The digital currency has seen explosive valuation growth in recent years.
It gained additional credibility in February when Tesla said it had bought $1.5 billion worth of the cryptocurrency and announced it would begin accepting bitcoin for payments.
Musk has tweeted frequently about other digital currencies, including Dodgecoin, originally created as a joke, but which now sports a market capitalization of $58 billion.
Bitcoin and Dodgecoin prices fell sharply after Musk's tweet Wednesday. Bitcoin fell more than 8%, to $51,758 while Dodgecoin fell more than 10% to 44.3 cents, according to Yahoo Finance data.
On Tuesday, Tesla shares fell following reports the company is facing resistance from Chinese officials to its plans to expand its Shanghai gigafactory. Musk also tweeted a poll question asking whether Tesla should accept Dodgecoin as payment.
Earlier this month, Tesla raised prices by $500 on its Model 3 vehicles and by nearly 1% on its Model Y sport utility model.
Shares of Tesla fell 1% in after-hours trading to $584.20.