Telegram, a popular messaging app with 200 million users, was founded in 2013. Last year, Telegram launched a $1.7 billion dollar token sale. Earlier today, the Securities and Exchange Commission announced that it filed an emergency action and also obtained a temporary restraining order against two off-shore entities associated with Telegram Group Inc.
“The complaint alleges that defendants failed to register their offers and sales of Grams, which are securities, in violation of the registration provisions of the Securities Act of 1933.”
It’s a bit perplexing, although probably shouldn’t come as a surprise that the SEC is broadly applying a law that predates the very existence of blockchain technology by 76 years!
Also directly from the press release, here is what Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement, had to say, “Our emergency action today is intended to prevent Telegram from flooding the U.S. markets with digital tokens that we allege were unlawfully sold.”
This negative development comes just after the Chairman of the Commodity Futures Trading Commission (CFTC), Heath Tarbert publicly declared Ether (ETH) as a commodity while on stage at Yahoo Finance’s All Markets Summit on Thursday.
Telegram’s intent has been to launch its own blockchain called Telegram Open Network (TON), with an associated cryptocurrency named GRAM.
It would seem that one way, or perhaps the only way, for the CFTC to consider a digital currency as a commodity and not a security would be for the currency to launch through the process of Proof-of-Work. Telegram designed their blockchain using a proof-of-stake protocol.
Things were moving along rather smoothly in recent weeks. For Telegram, the month of September saw the release of the code necessary to run a blockchain node. TON Labs maintains a suite a developer tools giving developers “access to a modular framework that supports the entire development cycle of a blockchain product.”
We’ll have to keep an eye on the space to see if Telegram launches it blockchain by October 31 as planned.