Telegram’s cryptocurrency Gram is ready for launch in late October. However, following the regulatory pushback against Facebook’s Libra, is Telegram prepared to buck regulators and press send?
Telegram made headlines in 2018 when it launched one of the most ambitious ICOs ever. The encrypted messaging app provider raised a whopping $1.7 billion to develop and launch a blockchain ecosystem and native digital asset.
The messaging giant floated its first presale in February 2018, where it raised $850 million from 81 accredited investors. The second round of the token offering was held in March, raising another $850 million from 94 accredited investors.
However, in May 2018, following increasing regulatory pressure on the ICO model, Telegram canceled the portion of its token offering that was going to be made available to the public.
Telegram’s ICO has been even more secretive than Facebook’s Libra project, with few details made public. The $1.7 billion was funneled into Telegram’s Open Network (TON), which will provide the architectural support for the various blockchain-based services the messaging giant is reportedly working on.
Similar to the sentiment expressed by Facebook in the Libra whitepaper, the messaging giant revealed that it hopes to leverage the features of blockchain technology to bring about a “vision for a new cryptocurrency and an ecosystem capable of meeting the needs of hundreds of millions of consumers, including 200 million Telegram users.”
According to the TON primer, Telegram plans to launch its native digital asset on a public decentralized ledger over which any single party, including itself, would not have any undue influence.
Pushback from authorities
As mentioned above, Telegram canceled its public ICO after raising $1.7 billion during its private sale. A confidential source cited by the Wall Street Journal alluded to regulatory pressure as a major reason for the action.
It is important to note that in the period between which Telegram announced plans to float its token offering and the planned date, the regulatory environment and attitude surrounding ICOs changed significantly. A large portion of the crypto market has fallen victim to unscrupulous parties seeking to capitalize on the ICO craze. As a result, authorities started to crack down on the digital token-powered fundraising tool.
Regulatory agencies in the US, such as the Securities and Exchange Commission and the Commodity Futures Trading Commission, began to issue statements and directives which negatively impacted the momentum of the ICO market. Speaking to Congress in February, the chairperson of the SEC said, “Many ICOs are being conducted illegally. Their promoters and other participants are not following our security laws.” Additionally, authorities began to take these issues to court, bringing legal proceedings against several ICOs that were operating outside of legal boundaries.
Another issue to consider is the Telegram messaging app’s history with governments. Telegram touts itself as an encrypted app. In the current climate, where privacy concerns are the norm, the application has a wide fan base due to its privacy-centric features. However, some governments around the world have expressed displeasure over the app and its ability to support communication in a manner that is outside the control of a centralized authority.
Iran and Russia have banned the application, though people are still able to access it. Telegram’s founder, Pavel Durov, is in self-imposed exile following ideological clashes with his home country Russia.
Considering Telegram’s history, and the adversarial regulatory response to Libra, it is expected that policymakers will express many of the same concerns that came up following the announcement of Facebook’s cryptocurrency.
Given that Telegram is an application with a 300-million-strong user base, regulators will likely show consternation over the possibility that Gram may be used to finance terrorism, enable money laundering, and used by organized crime. Furthermore, due to the decentralized nature of the TON ledger, the transactions sent on the GRAM network will be censorship-resistant. For regulators, this may become an issue.
Gram: emerging details
While details are scarce, a new report from The New York Times has revealed new information. According to documents reviewed by the publication, Telegram is planning to launch Gram in the third quarter of 2019. While this is hardly new information considering the roadmap included in the TON primer, the NYT report reveals that the messaging giant stands to forgo its ICO funds if it does not deliver its native digital asset on or before 31st October 2019.
If investors do not receive their Gram on the aforementioned date, Telegram must refund the $1.7 billion raised during its successful ICO, minus development funds. This is an eventuality that the company would hope to avoid. Thus, TON is aiming to deliver “the first batches” of Gram in the next two months. The company will also launch a Gram digital wallet where investors can store their cryptocurrency. Interestingly, the wallet will be available to all Telegram users regardless of their status as initial investors in the Gram ICO.
It is unclear how the Gram rollout will proceed given the intense regulatory scrutiny that is likely building behind the scenes. Furthermore, in the past, security experts have pointed out vulnerabilities and flaws in the Telegram code, issues which may be confounded if money is involved.
Despite these concerns, it seems the market is excited about Gram as secondary markets have already opened up across the world, in some cases selling for four times the original price of the asset. The rollout of Gram may even have a positive effect on the rest of the crypto market leading to a year-end rally in crypto asset prices.