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Invest in Bitcoin service companies, diminish direct risk

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The wealthiest man in Asia, Li Ka-shing has invested in BitPay, the digital currency equivalent of PayPal, through his venture capital company, Horizons Ventures, reports the South China Morning Post today in Asia.

Investors looking for a way to make money from the global Bitcoin bonanza should steer clear of the pseudo currency itself and instead follow Li Ka-shing's lead: buy in to the firms providing the services that Bitcoin holders use. That advice comes from John Greenwood, the London-based chief economist of Invesco who designed Hong Kong's pegged currency regime.

Greenwood made a comparison to the time of the gold rush when suppliers of picks and shovels would make money. ‘Invest on the peripheral activity,’ says Greenwood.

A spokeswoman for Horizons Ventures said the group would not comment on the details of the investment.

A BitPay representative said it was ‘fortunate to have the benefit of many supportive investors, including Horizons Ventures’. The two year old payment service company handles 14,000 transactions of Bitcoin in two hundred countries. About half are in the United States, with 25 per cent in Europe and 25 per cent in the rest of the world.

Greenwood said Bitcoin was 'simply not credible as a global currency as it failed to fulfill three fundamental requirements: be an effective medium of exchange for a wide range of goods and services; be a long-term store of value or be used for the settlement of long-term contracts; or be a universal unit of account.'

Bitcoin became popular with Chinese mainland investors as it usurped Beijing's controls on the movement of capital across its national borders - currently limited to a maximum of US$50,000 equivalent without permission from regulators.

The Bitcoin price topped US$1,242 (HK$9,630) per coin on the Japan-based Mt Gox exchange at the height of the boom, at the end of November. It fell to HK$4,187 as Beijing intervened when its mainland's central bank ordered third-party payment platforms to stop providing clearing services to bitcoin, litecoin and other crypto-currencies before the end of January. Early in December, it told financial institutions not to provide services for virtual currencies.

In Hong Kong, Secretary for Financial Services and the Treasury Professor Chan Ka-keung said Bitcoin’s value had been like a roller-coaster ride, making it unsuitable for settling payments. ‘It is not qualified to become an electronic currency. Citizens should be wary of it,’ Chan said.

South China Morning Post has this news in its Friday, Dec. 27 morning edition.

To learn more about Bitcoin, please view the articles listed below this review.

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