Before Facebook stole headlines (and the attention of legislators worldwide) with its Calibra project – through which it would foster a payments association to adopt its Libra cryptocurrency – Telegram opened up the social media debate with its plan to launch the Telegram Open Network (TON), which would similarly accommodate its own cryptocurrency token – colloquially called The Gram – through a network of messaging apps and e-commerce environments.
The plan for Telegram was simple – to conduct a massive, $1.7 billion USD ICO (initial coin offering), in which a round of interest investors would be able to fund the creation of the network. After numerous stop/start delays, the launch of the network itself was imminently scheduled for October 31st this year.
However, the US Securities and Exchange Commission, or SEC, (which regulates the sale and use of commodities and securities) has ordered Telegram to halt its planned launch.
The US SEC has previously positioned itself has a watchdog in the debate as to whether cryptocurrency tokens (or coins) are actually utilities or securities. The former would dictate that cryptocurrencies are solely used as currency to achieve a particular function as a utility and do not derive speculative value based on the market cap or market valuation of a cryptocurrency network as a whole.
In the latter instance, if a cryptocurrency were identified as a security, it would mean that the value of the base unit cryptocurrency itself would derive speculative value based on external factors, and to legally satisfy its existence would be subject to regulation to prevent market manipulation.
The SEC is accordingly treating TON tokens (or Grams) as a security, meaning that Telegram may run afoul of securities laws. In a statement, the SEC clarified that its “…emergency action today is intended to prevent Telegram from flooding the US markets with digital tokens that we allege were unlawfully sold… We allege that the defendants have failed to provide investors with information regarding Grams and Telegram’s business operations, financial condition, risk factors, and management that the securities laws require.”
Should Telegram be unable to distribute tokens by October 31st, the company will need to return all funds raised towards the launch of the network, as The New York Times reports.
The news is a fascinating window into what fate(s) might befall Facebook’s Calibra project, and whether permissioned or company-fostered cryptocurrencies might actually suffice in the full face of the law. While partnering a cryptocurrency with in-app payments seems like a logical destination, few applications or services have actually made the leap.
What are your thoughts? Be sure to let us know in the comments below.