10 July 2014 Last updated at 10:44 ET

Jersey approves first regulated Bitcoin fund

There are a number of businesses in the island that accept Bitcoin as payment

A regulated Bitcoin investment fund overcomes anonymity concerns about the virtual currency, says its director.

The Global Advisors Bitcoin Investment Fund (GABI) has been certified by the Jersey Financial Services Commission to run from 1 August.

Daniel Masters said Jersey's regulatory system meant major investors, such as pension and insurance companies, could invest in Bitcoin for the first time.

The fund will not be open to investments from the general public.

Global Advisors is a Jersey-based hedge fund company which usually specialises in commodities such as metals and oil.

WHAT IS BITCOIN?

Bitcoin was founded in 2009 although nobody knows by whom.

Each Bitcoin, like other forms of crypto-currencies, is simply a long string of computer code protected by a personal key which provides ownership and security.

All Bitcoins in circulation and their transactions histories are recorded in a giant ledger known as the blockchain. This prevents Bitcoins from being spent twice.

No middleman is required to verify the transaction so they are quick, secure and cheap to use.

Are crypto-currencies the future of money?

Mr Masters said investors would have to conform to the same security checks as those undertaken with mainstream financial products.

"For institutions there are no options right now," he said.

"This is institutional strength and it's an absolute world first."

'Money laundering'

Island leaders want Jersey to become a global centre for digital currencies and Bitcoin payments are already accepted by some local businesses.

There have been issues around the digital currency, including a lack of regulation and concerns over potential for money laundering and other illegal activity.

In October 2013 the FBI shut down online marketplace Silk Road, which traded in drugs and other illegal goods and took payments using "crypto-currencies".

"There is an anonymity associated with Bitcoin... but any cash or any Bitcoin coming into or out of our fund has to be fully identified under KYC (Know Your Customer) procedures, so there will be no dictators or criminals sending us money," said Mr Masters.