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Li Ka-shing's bitcoin play is worth emulating, says top economist

Economist recommends buying in to firms providing services to virtual money, as Asia's richest man has

PUBLISHED : Thursday, 26 December, 2013, 4:03pm
UPDATED : Friday, 27 December, 2013, 12:24pm

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's according to John Greenwood, the London-based chief economist of Invesco who designed Hong Kong's pegged currency regime.

"Just like investors in days gone by made more money out of selling shovels and picks to gold-diggers than anyone ever made out of the gold mine, he is investing in the peripheral activity that bitcoin has generated," Greenwood said.

Asia's richest man, Li Ka-shing has invested in BitPay, the digital currency equivalent of PayPal, through his venture capital company, Horizons Ventures.

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

BitPay said it was "fortunate to have the benefit of many supportive investors, including Horizons Ventures".

BitPay, founded in May 2011, handles transactions for 14,000 companies across 200 countries. About half are in the United States, with 25 per cent in Europe and 25 per cent in the rest of the world.

 

Bitcoin emerged in 2009 as a low-cost way of sending money electronically. It eliminates the need to funnel money through third parties, such as banks or card payment processors. And it is not regulated by a central bank. Currently, there are more than 11 million bitcoins in circulation.

They can be bought and sold on online exchanges or "mined" using high-performance computers.

Greenwood said bitcoin was simply not credible as a global currency as it failed to fulfil 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.

The virtual currency became popular, especially on the mainland, because it enabled individuals to get around 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.

"This, I believe, is the fundamental reason why bitcoins rose in price so steeply, and why the Chinese authorities have now acted to outlaw conversions from renminbi to bitcoins and vice-versa," Greenwood said.

Watch: What's Bitcoin and how does it work?

The mainland's central bank has ordered third-party payment platforms to stop providing clearing services to bitcoin, litecoin and other crypto-currencies before the end of January. Earlier this month, it told financial institutions not to provide services for virtual currencies.

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.

It has been a roller-coaster ride for investors such as musician Zou Lunlun. Zou's investment in 100 bitcoins peaked in value at HK$962,051 before falling to HK$418,719. Local investor Casper Cheng Tsz-chun, 16, has held on to his 50 bitcoins despite watching them halve in value, to HK$209,357.

Bitcoin has received a lukewarm response from the Hong Kong government despite interest from the city's community of entrepreneurs. A month ago, Financial Secretary John Tsang Chun-wah predicted a huge correction, saying bitcoin's run could not last as there was "no support from the real economy".

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.

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This article is now closed to comments

freemarketingtips
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sonkit
Watch out of scams that runs in Bitcoin.Bitcoin is not a get-rich-quick scheme. Just to let everyone know.
kashfiya.rafa.7
Bitcoin is a virtual currency that frequently appears in the media for its celebrity like ability to draw attention. To use Bitcoin at a more advanced level, an exchange connects you to people all around the world buying and selling Bitcoins. Exchanges offer both a web wallet for storage and management, and an easy way to trade using major currencies.
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sbo.bitcoin
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Bitcoin Exchange
we commented on this recently on our blog. see- www.bitmorecoin.com/blog.html
eustox
Long live Bitcoin !
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JaneC
I have to disagree with Greenwood that Bitcoin doesn't count a currency?! it's just getting stronger everyday I'm starting mining them with groupbitcoin.com
gregory.loren.simon
it is unfortunate the positive news of a big Asia investor showing confidence in the future of the bitcoin protocol by investing in Bitpay is buried in an article full of negative propaganda. This article stinks of establishment fear. How lovely it it.
chase.clute
It would be very ignorant to believe these people who sit at the top of the "food chain" tell you bitcoin isn't going to work. Encase you haven't figured it out yet these so called "experts" are all bought and paid for. I can only imagine how much money the banks, etc, etc put into the hands of politicians to make sure these types of messages get out!! Just think of how much the banks well lose in transaction fees once this takes off. Any resident of the US knows the banks and Wall St own this country. I for one cant wait to see what this does to their "pocket book."
dyson.lu
LOL. Make no mistake. People at the top of the food chain is EXACTLY the people who will be controlling and exploiting the most out of bitcoins and its value. If they can control prices of gold and commodities, controlling an entity that only exists in computers, with no tangible physical support, will be easy. The naive think he'll escape the government's "control" only to find himself under the control of the rich and powerful (banks, mafias, etc.). That's the truth since the dawn of man.
You think entities like BitPay will not behave like the big bad banks in a foreseeable future? LMAO Think again.

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