Tesla has suspended vehicle purchases using Bitcoin due to climate change concerns, its CEO Elon Musk said in a tweet. Bitcoin fell by more than 10% after the tweet, while Tesla shares also dipped.
Tesla's announcement in March that it would accept the cryptocurrency was met with an outcry from some environmentalists and investors.
The electric carmaker had in February revealed it had bought $1.5bn (£1bn) of the world's biggest digital currency.
But on Thursday, it backtracked on its previous comments.
"We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel," Mr Musk wrote.
"Cryptocurrency is a good idea... but this cannot come at great cost to the environment."
He also said the electric carmaker would not sell any of its Bitcoin, and intends to use it for transactions as soon as mining shifts to using more sustainable energy.
Market analysts see the move as an attempt by Tesla to assuage the concerns of investors who are focused on climate change and sustainability.
"Environmental, Social and Corporate Governance (ESG) issues are now a major motivation for many investors. Tesla, being a clean energy-focused company, might want to work better in the environmental area of ESG," Julia Lee from Burman Invest told the BBC.
"But a cynic might suggest that this is just another move by Elon Musk to influence the cryptocurrency market, as he has done on so many other occasions," she added.
