PayPal Founder Invests in Bitcoin

NEW YORK (MainStreet)—The world's leading bitcoin processor BitPay Inc. has raised $2 million in seed money led by Founders Fund, which includes PayPal founder Ken Howery.

"It's a natural evolution given our payments background at PayPal," said Howery. "We were intrigued and spent time trying to get comfortable with questions around regulation but eventually decided to make our first investment in BitPay."

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Yet, it's still unclear as to when consumers can expect to be using bitcoins when they make purchases using PayPal. Homeland Security Investigations recently took action to seize the assets of Mt. Gox, the world's leading Bitcoin exchange. Mt. Gox's account was frozen at the request of investigators. The first federal action against the currency isn't a surprise.

Bitcoin advocates have spoken of the currency's potential ability to sidestep government supervision.

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"From PayPal's perspective, I assume the management is taking a wait-and-see approach to Bitcoin adoption," Howery said.

Howery should know. He helped raise $90 million in 2001 for PayPal's fifth round of financing, the vast majority of which came from abroad.

"After the stock market crash in 2000, it was hard to raise money in the U.S., so we had to go to groups in the MiddleEast, Asia and Europe for funding," Howery said. As a co-founder of PayPal and partner at Founders Fund, Howery invests in about three new companies a year with typical investments ranging from $2 million to $25 million per company. Every couple of years, the fund he manages with Peter Thiel and two other partners will make bigger re-investments of $75 to $100 million in companies they have already invested in.

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