After a long coming and going from the messaging company Telegram, they have decided to give an end to the development of their blockchain platform Telegram Open Network (TON)
For those who thought Telegram was only a messaging company, with their messaging app similar to WhatsApp, they are wrong. They are also a messaging security company, as they specialize in cryptography and encryption. To both levels, on the client side, meaning where the user uses the product, and on the server side, meaning where the Back-end service occurs. Messages are encrypted not only on the app, but on the server too.
For a bigger surprise for a lot of us, the company has gotten funding, and a lot of it, $1.7 Billion to be exact, to develop a Blockchain Service. Known for their security and strong reputation based on their whitepaper, they had no problem with the fundraising.
The news was expected as in the previous months there were speculations about the government trying to control the Issuance of the Coins offered by the platform. Then the news migrated to Telegram trying to issue Tokens only to Non-US citizens. Meaning that privately there was repercussion on the offering of Tokens to US citizens.
As the request was denied by a federal judge of the US court, the news was very predictable. There was no way there would be US citizens accessing the TON network. A couple days later, 3 to be exact, the news was final. The decision has been made, and there was no going back. A turning point in the history of blockchain regulation.
Telegram abandons the development which had launch date for April 2021. After months of development and Huge amounts of capital spent in research, development and testing.
The product would have enabled Payments through their “Grams” (coin name), and worldwide transactions with no remittance fees. There are already some companies cutting down the remittance fees of the original high-cost Western Union. For example, Transferwise, Founded by Richard Branson. But they by no means offer what Telegram was expected to offer: No fees international money transfers.
Fortunately for investors, they have been able to receive a partial refund of their investment. In another case the company could have said that the money had been used, But it was not the case. Telegram refunded 72% of the invested capital, summing up to $1.2 Billion.
Durov, Founder of Telegram, far away from happiness and closer to frustration made a very interesting post on social media claiming that he has failed, but wishing luck and supporting everyone who is striving for decentralization and equality. “I want to conclude this post by wishing luck to all those striving for decentralization, balance, and equality in the world. You are fighting the right battle. This battle may well be the most important battle of our generation. We hope that you succeed where we have failed.”
As it may appear unjust, as there are other approved blockchain projects working and with a market capital of Billions of dollars, such as Bitcoin or Ethereum, Telegram has violated the rules when it comes to ICO. The Initial Coin Offering of the company had raised $1.7 Billion dollars.
The exact lawsuit data has not been disclosed as they preferred to maintain it private. So for what we know, to be precise to the point of what is public, we can say that Telegram did not cooperate or had legal Tokens filed with the SEC (Securities And Exchange Commission) The Tokens were not issued as securities, but as independent notes which are prohibited by the US Government.
As the company abandons its project, but the project was opensource, other projects have emerged based on the development that was already done.
Free-TON, a startup running a test of TON will continue to operate. Durov claims it has nothing to be with the company and it warns that third party companies under the same name won´t be recognized as authorized developers. Meaning, they are on their own with a similar name.
We don’t expect other projects to offer a blockchain service, as they have even less chances than Telegram. Imagine a multinational company being sued by the SEC, and a small startup being able to achieve what Telegram tried and couldn’t. It simply doesn’t make any sense.
One very valid argument and public opinion is one that claims that the government wants to limit any kind of financial development where they are not benefited or included. It is obvious that these kinds of regulations will have to change in the short term future, as there will be constant remodeling and innovation in the financial services sector. “they can´t just pass a law and limit innovation” well, indeed they can and it just happened.
Bitcoin winnings are taxed and currently are regulated as a property, another way of saying the value is the same as Stock. The same would have applied to TON, meaning they just limited the Countries earnings by Billions. For some undisclosed reason, they didn’t come to a settlement, as many other companies breach Government laws and then come to an arrangement.
Look at Uber, the company that has adopted the concept of innovating first and adapt legally later. Well, in the Fintech industry it comes with tougher regulation. Things have to first be regulated and then executed.
Well, the intent of the 400 million users platform has failed, but Developers… don’t think this is over… Facebook is developing Libra, a project that started as a payment solution and now has changed its focus to developing a cryptocurrency.
To close things up, Telegram couldn’t settle with the US government and after months of fighting for the project, they decided to abandon it. The government may have their own reasons on why they decided to ban TON, and we can expect Facebook´s Libra project to be launching in 2021 with new financial capabilities.