Hong Kong’s Central Bank Warns Users against Investing in Bitcoin

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Hong Kong’s Central Bank Warns Users against Investing in Bitcoin

According to the South China Morning Post, Hong Kong’s central bank has warned people against investing in virtual currencies like Bitcoin. The decision came after the bank across with local media reports that a Bitcoin exchange may have run off with $387 million in client funds. This is expected to be one of the biggest Bitcoin scandal.

The authorities say that if it comes true the Bitcoin scandal is similar to the one that happened with Mt. Gox, a Japanese Bitcoin exchange that collapsed later on. The South China Morning Post says the reports regarding the scandal came in on Monday wherein clients of Hong Kong-based MyCoin approached a local lawmaker alleging the company absconded with Bitcoin.

Reuters, the news agency reports that an assistant for Legislative Council member Leung Yiu-chung told it that he had received more than 15 complaints from MyCoin clients regarding the alleged fraud, and these would be passed on to the police later on. Bitcoin hacking is not new, several incidence indicate that these are becoming quite frequent these days.

In a statement the Hong Kong Monetary Authority or HKMA said that the case may involve fraud or pyramid schemes. It says that given the highly speculative nature of Bitcoin, it has all along urged the public to exercise extra caution when considering making transactions or investments with Bitcoin.

Safe and Secure Storage Using Cold Bitcoin Storage

Nonetheless, Bitcoin that are created through a ‘mining’ process where a computer’s resources are used to perform millions of calculations, are often at risk when stored in a Bitcoin wallet. There is cold storage for Bitcoin which are being considered safe as these are detached and accessed offline by the users.

In one of the biggest Bitcoin scandal, Mt. Gox, once the world’s largest Bitcoin exchange in 2014 lost around $500 million worth of customer Bitcoin in a hacking attack. Once all its Bitcoin were stolen the organization filed for bankruptcy later on. Thereafter several other instances also happened when the investors lost their digital currency stored.

In a similar incidence MyCoin which claims to be a leading global Bitcoin trading platform and application service provider with a China-based research and development team, has lost $387 million. The company has though promised clients a HK$1 million (£84,610) return over a 4-month period based on a HK$400,000 investment that would produce 90 Bitcoin on maturity.

To contact the reporter of this story: Deepak Tiwari at deepak@forexminute.com