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Malaysia: Finance Regulator, Central Bank Say Cryptocurrency Regulation ‘Being Put in Place’

Authorities are in the process of developing cryptocurrency and ICO rules, which could become law in Q1 2019.

Malaysia’s finance regulator and central bank issued a joint press statement Dec. 6 in which they confirmed they were “putting in place” legislation on cryptocurrency and Initial Coin Offering (ICO) assets.

The statement from the Malaysia’s Securities Commission (SC) and Bank Negara Malaysia (BNM), which follows comments from senior government official that regulation of the sector could appear in Q1 2019, also reiterates the need comply with securities laws where appropriate.

“The SC will regulate issuances of digital assets via initial coin offerings (ICO) and the trading of digital assets at digital asset exchanges in Malaysia,” it confirmed.

“Regulations are currently being put in place to bring digital assets within the remit of securities laws to promote fair and orderly trading and ensure investor protection.”

Malaysia has slowly enacted a formalized stance on cryptocurrency activities this year. Last month, in addition to revealing the potential deadline, the country’s finance minister Lim Guan Eng also stated that anyone wishing to issue a new asset could only do so with BNM’s blessing.

“I advise all parties wishing to introduce Bitcoin (style) cryptocurrency to refer first to Bank Negara Malaysia as it is the authority that will issue the decision on financial mechanism,” he said.

Among those eyeing the developments is a local initiative dubbed “Hope Coin,” the creators of which may have to wait for the process to complete before launching.

The moves come hot on the heels of Thailand, which is around six months into the introductory phase of its own regulation.

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‘Hope Coin’: The Story of Malaysia’s Crypto Political Fundraising Platform

Crypto fundraising might be a great tool to fight corrupt regimes, but what happens when freedom fighters seize power?

The ongoing controversy surrounding Malaysia’s proposed political cryptocurrency, Harapan Coin, is far from letting up. On Nov. 26, the country’s finance minister, Lim Guan Eng, weighed in on the issue by reiterating that any entity looking to issue a cryptocurrency should first refer to Bank Negara Malaysia (BNM) and the Securities Commission:

“Don’t do it without Bank Negara’s guidelines or directive on the matter to avoid doing something wrong and against the law.”

During the same press conference, Lim Guan Eng also said that he had asked a government official — who has recently made a series of statements in support of the project — to tone down the promotional campaign until the financial authorities comes up with a coherent regulatory framework. The turbulence around the proposed asset, which is touted by its creators as “the world’s first political fundraising platform,” has been heightening throughout the last few weeks, as many of Malaysia’s prominent political actors voiced their doubts and concerns with regard to the project. Meanwhile, many aspects of Harapan Coin’s provenance and functionality remain opaque to the public.

Backstory

Since the proclamation of Malaya’s independence in 1957 and until May 2018, a single political power — a coalition called Barisan Nasional (BN) — has been at the helm of the country’s government. Its three major member organizations represent Malaysia’s dominant ethnic groups: UMNO (United Malays National Organisation) is a party of the Malay majority, while Malaysian Indian Congress (MIC) and Malaysian Chinese Association (MCA) are the political bodies of the country’s Indian and Chinese communities, respectively.

The last decade saw BN’s political dominance erode, due in no small way to a series of devastating financial and political scandals that shook the highest tiers of the government.

Perhaps the most notorious of those is the still ongoing 1Malaysia Development Berhad (1MDB) scandal. In 2015, it was revealed that, as a result of a large-scale, multi-year embezzlement scheme, hundreds of millions of dollars have been siphoned off from the state-owned investment fund 1MBD into bank accounts associated with Prime Minister Najib Razak of Barisan Nasional.

Egregious as it is, this embarrassing episode of high-ranking officials abusing public funds is anything but unusual for Malaysia’s recent history. Before 1MDB, there was the Bank Negara Malaysia (BNM) forex scandal, in which the lack of oversight over the central bank’s adventurous trading activities resulted in the nation’s loss of billions of dollars.

Before the BNM forex wreck, there was the Bumiputera Malaysia Finance (BMF) flop, which involved a Hong Kong subsidiary of a Malaysian state-owned bank generously handing out impressive amounts of money in bad credits to Hong Kong-based property speculators. Long story short, there appears to be pattern indicating a persistent problem with the way Malaysian officials handle public funds — a problem big enough for blockchain-minded people to start thinking of a solution.

Taking on the unjust power of ill-gotten money in Malaysian politics has become the central idea behind the new Harapan Coin (literally, “Hope Coin”), conceived sometime in early 2017. Setting their sights on the 14th Malaysian General Election, scheduled for May 2018, the coin’s creators proclaimed it “The World’s First Crypto-Politic ICO” and marketed it as a means of funding the united opposition to Barisan Nasional.

The manifesto — found on the coin’s website — presented the group behind the project as “patriotic and concerned Malaysian citizens, within and outside of Malaysia.” Several personal accounts by backers from outside of the country featured stories of them not being able to contribute to previous campaigns due to the obstacles created by the allegedly BN-controlled Malaysian financial authorities.

The identities of the people working on Harapan Coin have been concealed all along, citing “the Draconian laws of limiting and non-respecting [sic] individual rights to freedom of expression of the current BN government,” the website contains only their first names, blurred pictures and locations in countries outside Malaysia.

The project’s website offers a mix of inspirational language, suggesting its role in advancing a much-needed political change — “a beacon of hope to supporters seeking a better future” — with some more pragmatic and profit-minded considerations — “Coin[s] collected are expected to rise in price. […] Buy into a new change, invest in a new era of democracy.” The website also explicitly stated that the coin had the “potential to become an official currency if Harapan wins [the] election.”

Post-GE14

May 9, 2018, marked the first regime change in Malaysian history: Following the general election, the Pakatan Harapan (PH) coalition managed to secure 121 out of 222 seats in the Dewan Rakyat — the lower house of the nation’s parliament — keeping Barisan Nasional down to just 79 seats. It is unclear how much of this triumph was due to successful crypto fundraising.

Harapan Coin’s roadmap stated the ambitious goal of collecting $257 million in two rounds of an ICO before the election. While some reports suggest that coin sellers claim to have raised as much as $123 million in the presale and first round, this information is nowhere to be found in the project’s public-facing communications. The only figure available on the website as of late November appears to indicate that the amount of funds raised so far barely exceeds $800.

Harapan Coin was designed to provide the infrastructure to financially support the united opposition to BN in the May 2018 general election. Months after the electoral victory, the project’s website still features headshots of the Pakatan Harapan (PH) coalition’s politicians, accompanied by their campaign statements. It also mentions that the new digital currency is co-founded and supported by Khalid Samad, the Malaysian Minister of Federal Territories. Samad — who has been an MP since 2008 but became minister only with the advent of the new Pakatan Harapan government in July 2018 — is now the main driving force in promoting Harapan Coin post-election.

Now that the anti-BN coalition has prevailed, it looks like Samad is working to repurpose the Harapan Coin infrastructure to serve the fundraising needs of his coalition in the new political environment, where they are the incumbent political power rather than the opposition aspiring to topple a longstanding regime.

While the project’s objectives prior to the election were straightforward, they are now much murkier. Is it now going to be a single political party’s own coin? What about the vague promises of the possibility for the coin to become legal tender if the election was won? The fact that both the white paper and website haven’t been updated since before the May election doesn’t help to illuminate the matter.

Nevertheless, Khalid Samad keeps pushing for the coin to be officially recognized. On Nov. 13, he announced that paperwork for Harapan Coin’s presentation before Bank Negara Malaysia (BNM) and Prime Minister Tun Dr Mahathir Mohamad. A week later, Samad mentioned that the project was under review by a Bank Negara Malaysia taskforce. The minister’s advocacy campaign, however, was met with criticism from all across the Malaysian political landscape.

Pushback

It should come as little surprise that one of the biggest issues that critics take in regard to the design of Harapan Coin is the proposed distribution of the funds raised. The current breakdown stipulates that as much as 30 percent of the money will go to the system’s administrators — who, as mentioned above, remain effectively anonymous. Another 30 percent is meant for Amanah, Khalid Samad’s own political party. Given that the coin is proposed to be state-backed — and possibly even used for paying state fees and fines — this would clearly grant one of the political groups an upper hand over all others at the expense of the government.

This was just one of the concerns raised by the nonprofit Centre for a Better Tomorrow (Cenbet) in a recent statement that warned all the parties involved of the project going “against the principles of good governance.” The group’s representative also stressed that the way the coin’s design facilitates political donations from overseas may open up the Malaysian political system to influence from abroad.

While it is hardly unexpected that recently deposed Prime Minister Najib Razak has spoken out against Harapan Coin, the sources of criticism are not confined to Samad’s political opponents. Fahmi Fadzil, a member of parliament who represents one of the parties that constitute the Pakatan Harapan coalition was among those politicians who admitted to having reservations with regard to a lack of mature regulation of cryptocurrencies, as well as potential issues associated with anonymity.  

One more blow to Harapan Coin’s prospects came from a somewhat unexpected direction. Dr. Zulkifli Mohamad Al-Bakri, mufti of the federal territories and one of Malaysia’s most authoritative experts on Islamic law, has recently stated that Bitcoin (and, by extension, other cryptocurrencies) should be considered haram, or forbidden. This could mean a lot in a country where over 60 percent of population practices Islam. Minister Samad hopes to address the mufti’s concerns by establishing a governing body to oversee Harapan Coin’s operations and ensuring its compliance with the religious authority’s vision.

Dim prospects

Overall, Harapan Coin in its current shape does not particularly look like an endeavor that is bound to succeed in the near future. Although it is aggressively promoted by a resourceful co-founder who happened to find himself in a high office, it is decried by civil society groups and religious authorities, while the financial arm of the government examines it with great caution. Neither does it enjoy political support from the national leader or members of the governing coalition outside of Khalid Samad’s own party.

Whereas the idea looked appealing at the time when the unified opposition forces were bracing themselves to overturn the incumbent regime, the subsequent victory has made the divides within the triumphant Pakatan Harapan coalition even more pronounced, and at the same time obscuring the need for an alternative political fundraising infrastructure.

It would help if Harapan Coin’s backers could clearly articulate their renewed plans and objectives, yet no such information seems to be publicly available. From what could be inferred about the project now, it is designed to blur the boundaries between the state and political parties, while lacking a clear definition of the mechanics of the proposed system, information about its developers and any particular checks on power abuse embedded into its design. For a country with a long history of financial wrongdoings at the hands of the powerful, this combination hardly makes for a strong pitch.

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Malaysia’s Watchdog Orders Immediate Stop to Beauty Guru Lavidacoin Promotion

The Securities Commission (SC) of Malaysia has ordered an immediate halt to all promotional activities for the recently-launched Lavidacoin (LVC) pending further review, according to a September 5 notice on the SC’s website.

According to local news outlet The Star, Lavidacoin was created by Malaysian cosmetics mogul and beauty guru Datuk Seri Hasmiza Othman, aka Dato’ Vida. The beauty guru reportedly hoped to use an Initial Coin Offering (ICO) to raise as much as $1.5 billion to create an “entrepreneur-focused” online entertainment channel, an LVC payment gateway, and even a “non-profit” mosque, as outlined in the project’s white paper.

The Lavidacoin first drew scrutiny from Malaysia’s SC in August over concerns the sales of the altcoin were in breach of local securities laws. The watchdog’s public notice at the time gave a generic warning, writing that:

“The SC advises investors to exercise due diligence and to be cautious of the risks of participating in any investment schemes, in particular schemes involving cryptocurrencies and digital tokens.”

In a fresh statement issued Wednesday, the SC identified DSV Crypto Club, LUX Galaxies, and VI Profit Galaxy as among the business entities promoting Lavidacoin, saying it was adding all three to its investor alert list, as well as reiterating its prior warnings. As The Star notes, all three entities were blacklisted by Bank Negara Malaysia in August.

As a Cointelegraph analysis piece has outlined, celebrities globally have capitalized on their fame to bolster crypto-related initiatives. While some, like Snoop Dogg, have backed already high-profile cryptos such as Ripple (XRP) through promotional events, others — including the renowned boxer Floyd Mayweather — have become mired in controversies surrounding their involvement in lesser known — and in Mayweather’s case — ultimately discredited crypto projects.

Among those who have taken the plunge and launched their own branded coins are former Liverpool soccer star Michael Owen, who this spring issued his own name-backed crypto dubbed OWN.

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Largest Blockchain Center In Asia Launched By NEM (XEM)

So many hardly talked about cryptocurrencies are doing fantastic in areas of blockchain orientation and re-orientation. One of these digital coins is NEM (XEM).

Yesterday, NEM Malaysia kickstarted its largest blockchain Center in Asia, stating afterward that it has said set aside roughly RMS500,000 (around $120,000) for blockchain projects in the country.

The center is going to be a base for incubating and accelerating startups and firms who needs information and expertise on blockchain technology and NEM integration in the region.

According to The Malaysian Reserve, who spoke with the country director, Stephen Chia, it was reported not many people understand everything about blockchain technology in the country, let alone of the world.

According to Stephen, “There is not enough understanding and (not enough) people who know how to use the technology to build up solutions for companies to solve some of the world’s problems.”

The country lead inferred that there is no adequate awareness on blockchain technology in universities and other schools where young people can have detailed understanding of the trend.

“I think the mindset still remains the biggest challenge. For example, people may think it is complicated because of the buzzwords or more specific terms that are used.

“Today, more and more corporate companies are beginning to venture into this technology, simply because they have clients who request for it,” Chia maintained.

He also stated that the country section has set aside about RM500,000 for the continuous education for university students, with future plan of conducting an entrepreneurial incubation programme for companies that want guidance on the use of blockchain technology in the country.

Over RM2,000,000 was invested into the center, which has 12 incubator offices, with companies coming in for training on blockchain. What began NEM’s success in Malaysia was its partnership with Malaysia Digital Economy Corp (MDEC).

NEM In the Market

Today, NEM has seen green light, increasing by 2.28% according to coinmarketcap, and a market capitalization of $1,752,696,000. XEM has a price worth of $0.194744 with a 24 hours market supply of $24,772,300. The cryptocoin is ranked 16th in the market staying atop of coins like VeCHain, Omisego, Qtum and many others.

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Malaysian Gov’t Committee Partners With Korean Lab to Develop Sharia-Compliant Blockchain

South Korean blockchain lab IncuBlock has signed a Memorandum of Understanding (MOU) with a Malaysian government advisory committee for blockchain tech development permissible under Sharia law, local news outlet IT World reported yesterday, June 18.

Blockchain tech has previously been used in terms of tracking halal foods, as UK-based HALAL TRAIL has begun using blockchain to track livestock and fresh food from farm to table through the halal food chain.

The committee, Majlis Perundingan Melayu (MPM), will work with both IncuBlock and MPM’s international partner, Global Cornerstone Group, on sharing knowledge and developing a blockchain platform and a decentralized application (DApp) that will meet the “social requirements” to be considered halal (permissible) by the Sharia Commission.

Kwon Won-seon, CEO of IncuBlok, said that the company’s experience with blockchain will be an asset to the collaboration:

“I will make a great effort to utilize the know-how of the blockchain we have accumulated over the years to develop the Islamic blockchain platform practically.”

Cryptocurrency’s place in Islamic banking and whether it can be considered halal cannot be answered simply, as Bitcoin (BTC) is not concretely defined as money according to Islam.

In April, a fintech startup in based in Indonesia released a report stating that Bitcoin is at least “generally permissible” under Sharia law, noting that crypto’s wide acceptance, lack of control by a central authority, and reliance on blockchain could make it more secure than current financial systems. The report concluded by warning the Islamic community to be wary of initial coin offering (ICO) scams preying on Muslims that promote fixed returns as a “halal investment.”

Dato Hassan Binhmad, Chairman of the Malaysian Government Advisory Committee (MPM), said in regards to the MOU that he hopes the collaboration will “lead to the development of blockchain technology that will be led by Malaysia and be used throughout the Islamic community.”

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Hong Kong Securities Regulator Says Raising Capital Is Job For VCs, Not ICOs

The head of the Hong Kong Securities and Futures Commission (Hong Kong SFC) said during a speech on April 13 on “New Technologies and Asset Management” that the type of fundraising conducted through Initial Coin Offerings (ICO) is better suited to venture capital funds.

Julia Leung, who is also the chair of the 2016 established Fintech Advisory Group, described the current era as the “fourth industrial revolution,” citing scholar Klaus Schwab, due to its new technological innovative promise. Leung notes that although the Hong Kong SFC in its role as a securities regulator sees new technologies like Blockchain as beneficial, she underlines that embracing this new technology comes with some important caveats:

“While we acknowledge that innovative technologies such as [B]lockchain have the potential to improve efficiency and financial inclusion, that does not entitle anyone to conduct fundraising from the public in violation of securities law. Because of the highly technical content and opacity of some of these projects, it is hard for an average investor to pick winners, a job more suited for professional investors such as venture capital funds.”

Leung adds the the reality is that many of the ICOs are “dubious, if not downright frauds […] [that] escape the scrutiny of the police or securities regulators because of their crossborder nature and the way the crypto assets are structured to fall outside any regulator’s perimeter,” mentioning the recent hacking of crypto exchanges in Japan and South Korea as a “sharp reminder of the risks” of crypto trading.

In February of this year, the Hong Kong SFC warned crypto investors about the risks of investment and vowed to keep policing ICOs and crypto markets. In March, the securities regulator shut down Black Cell Technology’s ICO on the ground that it was an unregistered securities offering, making the company return the funds it had raised to investors.

Moving forward with a crypto regulatory framework, Leung notes that the G20 recently spoke about the crypto sphere at their last meeting in March. In terms of Hong Kong specifically, Leung said that the Hong Kong SFC is working with their Investor Education Center to make crypto investors more aware of risks, as well as working with organizations overseas for fintech collaboration.

The Hong Kong Exchanges and Clearing Market (HKEX) announced in March that they would be opening a dialogue with the Australian Securities Exchange (ASX) on Blockchain innovation and implementation. Leung said in the speech that the Hong Kong SFC has also signed fintech innovation agreements with regulatory bodies in the UK, Australia, Malaysia, Dubai, and Switzerland.

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Two Bogus Bitcoin Brokers Charged With $365,000 Cash Robbery In Singapore

Two 36-year-old men have been arrested in Singapore after allegedly stealing $365,000 in cash from a Malaysian man who wanted to buy Bitcoin (BTC) from them, local media outlets reported Thursday, April 12.

The victim, Pang Joon Hau, had come to Singapore expressly to buy Bitcoins with cash, and believed both men to be Bitcoin sellers, arranging to meet them in his hotel on April 8.

The two men are said to have assaulted both Mr. Pang and his broker, fleeing with the cash.

One of the accused, Mohd Abdul Rahman Mohama, allegedly claimed he was a part-time Bitcoin broker. He is reported to have given his accomplice Syed Mokhtar Syed Yusope about $10,000 and himself spent around $80,000 on luxury goods, including a Rolex watch worth $45,800. The remaining $271,000 are yet to be accounted for. The two were arrested April 9th and 10th, respectively.

At a press conference April 12, Singapore Commander of Central Police Division, Assistant Commissioner of Police Arthur Law said that it is “highly unusual” for people to transact Bitcoin in person, and that Singaporean police are now investigating the origins of Mr. Pang’s large sum of cash.

In January 2018, St. Petersburg crypto blogger Pavel Nyashin was robbed of 24 mln rubles in cash from a safe in his home, after “boasting” of his crypto-derived wealth online.

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Singapore Plans Blockchain Push to Boost ASEAN Financial Inclusion

The Singapore government is looking to boost blockchain development in an effort to improve financial inclusion for Southeast Asian countries.

In opening remarks for a meeting with finance ministers from Southeast Asian countries on Friday, Heng Swee Keat, Singapore’s minister for finance, highlighted the government’s plans to foster innovations such as blockchain to improve access to finance in the region.

“In particular, we will support digital innovations like fintech. For example, the underlying distributed ledger technology presents us with many opportunities for cheap and secure transactions. This can promote financial inclusion for underserved and underbanked segments in ASEAN,” the minister said.

Although Heng did not disclose precise details on any blockchain initiatives, his comments come at a time when governments in Southeast Asia have been stepping up efforts to develop and adopt blockchain tech in the financial sector.

As reported late last month, Singapore’s Infocomm Media Development Authority (IMDA) has launched a blockchain competition with government funds to boost blockchain innovation in the region.

Meanwhile, the neighboring nation of Malaysia is also moving to utlize blockchain technology to advance banking services across the region.

In a speech in March, the deputy governor of Malaysia’s central bank indicated that nine banks in the country have already begun working with the central bank in developing blockchain powered applications for trade finance.

Similarly, Thailand’s Siam Commercial Bank is building out a Ripple-based blockchain remittance platform for cross border payments.

ASEAN flags image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Malaysia Central Bank: 9 Banks Experimenting With Blockchain ‘Scalable Use Cases’

Malaysia’s central bank hinted it is planning to integrate Blockchain in its banking sector, its deputy governor revealing ongoing development work in a speech Thursday, March 22.

Speaking at the Asian Banker Digital Finance Convention 2018 in Kuala Lumpur, Bank Negara Malaysia’s (BNM) deputy governor Jessica Chew Cheng Lian announced that nine domestic banks had partnered to build a trade finance Blockchain project.

“In the blockchain space, the industry in a number of jurisdictions has pooled resources to defray the cost of experimentation involved in developing scaleable [sic] use cases for the technology’s application,” she told the audience, stating:

“In Malaysia, nine banks have done this by coming together to develop blockchain applications for trade finance.”

As banks throughout Asia join together to examine various uses of Blockchain technology, including partnerships with Blockchain startups such as Ripple for remittances this month, competition is increasingly intense.

Malaysia appears to have consolidated its regulatory plans regarding both Blockchain and cryptocurrencies, BNM introducing new legislation in February that sets standards for the country’s crypto exchanges.

While no further details are currently known about the banking sector plans, Lian also said BNM was working on Open Application Programme Interfaces (Open APIs), which allow the creation of shared information networks.

A dedicated working group has been established to work on best practices, she added.

In a curious twist, the speech referred to American company Kodak as an example of the danger of not moving with technological change, despite the photography giant launching a controversial foray into Blockchain and cryptocurrency mining via an ICO in January 2018.

Last week meanwhile, Cointelegraph reported on how Malaysia-based airline AirAsia was also considering an ICO, becoming one of the largest established companies to do so, with CEO Tony Fernandes confident about navigating the current regulatory climate.

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9 Malaysian Banks Team Up for Trade Finance Blockchain Apps

Nine Malaysian banks have teamed up to develop blockchain applications for trade finance, according to the country’s central bank.

In a speech at a banking event on Thursday, Jessica Chew Cheng Lian, deputy governor of Bank Negara Malaysia (BNM), took a positive tone, saying the country is embracing emerging financial technologies, including blockchain, to advance banking services.

Lian said:

“In the blockchain space, the industry in a number of jurisdictions has pooled resources to defray the cost of experimentation involved in developing scaleable use cases for the technology’s application. In Malaysia, nine banks have done this by coming together to develop blockchain applications for trade finance.”

While the deputy governor’s remarks did not disclose which banks are involved in the collaboration, or further details of blockchain project being developed, they offer a window into the central bank’s approach to the techology.

To that effort, Lian further said that BNM has formed an open Application Program Interface implementation group, with members from the financial sector, as well as major fintech startups, whose main agenda is to develop a standardized open API framework.

The effort is aimed to further broaden access to financial technologies such as blockchain in a bid to facilitate adoption by financial institutions, according to Lian.

Malaysian coins image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.