In summary
- Following the arrest of Telegram CEO Pavel Durov in France and subsequent criminal charges, there are still many uncertainties about how this will affect Telegram’s Cryptocurrency ambitions.
- Telegram has emerged as a prominent player in the cryptosphere, fostering an ecosystem of on-chain gaming and services powered by The Open Network (TON).
- The allegations against Durov center on illegal content on the platform, but the timing of the indictment coincides with Telegram’s push into cryptocurrency-backed financial services.
Following the bombshell arrest of Telegram CEO Pavel Durov in France last weekend and subsequent criminal charges, there are still many uncertainties, especially as to how the high-stakes drama will affect Telegram’s massive cryptocurrency ambitions.
This year, Telegram became perhaps the most high-profile company to fully immerse itself in the cryptosphere. The dominant messaging service fostered the proliferation of an ecosystem of on-chain, in-app games and services powered by Telegram’s Blockchain of choice, The Open Network (TON). These so-called “mini apps” exploded in popularity this spring, thanks in large part to their ability for users to earn crypto rewards through token airdrops.
The boost in mini-app activity catapulted Telegram to a record 950 million monthly active users in July, and Telegram has directly embraced TON by using it to pay channel operators a share of advertising revenue, along with launching an in-app currency called Stars that is pegged to TON.
The company’s new path seemed so limitless that some TON developers prophesied that the app could soon use its on-chain mini-app model to become the West’s version of China’s all-in-one app, WeChat.
But cryptocurrencies are also notoriously risky legal terrain to play in. So now that Telegram appears to have awakened the regulatory beast, could the company’s crypto future be in jeopardy?
“How big do you want to be?”
The charges filed Wednesday against Telegram CEO Pavel Durov make no mention of cryptocurrencies at all. Instead, they focus on content related to illegal topics such as child pornography and drug sales that Durov allegedly allowed to proliferate on his platform.
But the timing of the indictment, amid Telegram’s aggressive push to make cryptocurrency-backed financial services a core offering, speaks volumes, according to Seth Goertz, a former U.S. prosecutor specializing in cryptocurrency and cybersecurity.
“The further down that road they go, the more they’re inviting scrutiny,” Goertz told Decrypt of Telegram’s financial and business ambitions. “How big do they want to become?”
The former prosecutor specifically pointed to the April integration of the popular stablecoin Tether (USDT) into TON and the Wallet app into Telegram. While this move was a big boost for Telegram’s mini-apps, allowing users to transact in a dollar-backed currency that doesn’t fluctuate as much as TON’s native token, the stablecoin also has a long history of encouraging illicit activity due to that very appeal.
“If governments see large amounts of Tether moving through Telegram, it will certainly attract tremendous attention,” Goertz said. “The dollar is a powerful thing.”
Decrypt reached out to numerous TON developers and mini-app creators on Telegram for this story about their thoughts on Durov’s arrest and how it could impact the future of Telegram’s crypto ambitions. All declined to comment.
Telegram did not respond to multiple requests for comment on this story.
Crypto Technology vs. Crypto Attitude
Not everyone is adamant that the factors that led the French government to arrest Durov have anything to do with cryptocurrencies or other technology promoted by Telegram, which could indicate that the company’s “all-in-one app” ambitions may not be the focus of the story.
Despite this week’s uproar on Crypto Twitter that framed Durov’s arrest as an attack on users’ privacy rights, Ben Rubin, the founder of the once-popular video calling app Houseparty, believes Telegram hasn’t made many uncomfortable with its actual privacy features.
In fact, the app is less secure by default than other popular messaging platforms with automatic end-to-end encryption like Signal, iMessage, and even WhatsApp.
However, Telegram’s leadership is known for its aloof attitude when it comes to requests from government entities. According to Rubin, this has created a perfect storm: Telegram has a wealth of vulnerable data about its users, but refuses to hand it over.
“My gut feeling is that this has nothing to do with crypto,” Rubin told Decrypt. “When a platform not only fails to protect user privacy — by not introducing end-to-end encryption — but also pisses off regulators, you get to the situation you’re in now.”
In that sense, Telegram and Durov may now be in trouble less for crypto technology, and more for embodying the same kind of anti-establishment attitude that has driven the crypto industry and turned Durov into something of an icon of free speech.
When French prosecutors announced charges against Durov on Wednesday, they specifically highlighted how Telegram’s failure to communicate at all with government entities was a crucial factor that aggravated the entire situation.
“This indictment is the result of an exhaustive investigation into Telegram’s almost complete lack of response to court requests, which has been a concern for multiple law enforcement agencies across Europe,” said prosecutor Laure Beccuau.
Rubin, who is currently building Towns, a permissionless app for group chats that runs on Ethereum’s Layer 2 Base network, said the conflict could easily be avoided if Telegram took the reverse approach to its current approach: automatically encrypting all user messages and allowing law enforcement access, when needed, to analyze other, more superfluous data.
“That’s how you really strike a nice balance, where regulators don’t have too much access to things and can’t abuse their power,” Rubin said.
“But they really need to work,” he added of regulators. “And I think we’re going to be in trouble if, for anyone building online communication, regulators come and ask to cooperate and we all give them the finger. That’s not going to work.”
In recent days, Durov’s arrest has become a rallying cry for tech leaders ranging from Elon Musk to prominent cryptocurrency investor and former Coinbase CTO Balaji Srinivasan.
Cryptocurrency advocates in particular have come to the defense of the Telegram founder, framing his prosecution as an existential attack on the core pillars of the decentralization movement.
But was it really the innovative crypto technology that so upset the French government in Durov’s case? Or rather, his defiant and dogmatic embodiment of the crypto personality?
Edited by Andrew Hayward
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