Messaging application Telegram has recently shut down its highly-publicized Initial Coin Offering (ICO). While reasons are presently unclear, tightening regulations are likely a major cause. Others are claiming Telegram’s already raised the money they once wanted.
ICOs Aren’t Exactly on Good Terms
The ICO was slated to be the largest cryptocurrency fundraising effort in history. Since 2014, ICOs have raised over $12 billion in total funds, though many have come under scrutiny due to fraudulent and scam-related activity. As a result, the Securities and Exchange Commission (SEC) is now examining ICO dealings to decide how best they should be classified and regulated.
Testifying before Congress on the subject, SEC chairman Jay Clayton recently exclaimed, “Many ICOs are being conducted illegally. Their promoters and other participants are not following our security laws.”
How Does It All Work?
Earlier this year, a whitepaper was published discussing how the Telegram cryptocurrency was slated to work, and how it could potentially overcome several limitations with other major cryptocurrencies, including bitcoin. Among the cryptocurrency’s many advantages were faster transaction times and lower fees.
“To this day, no consensus-backed currency has been able to appeal to the mass market and reach mainstream adoption,” the document explains. “Telegram will use its expertise in encrypted distributed data storage to create TON, a fast and inherently scalable multi-blockchain architecture.”
Telegram Is in Hot Water
Though based out of the United Kingdom, Telegram’s co-founder Pavel Durov is the Russian entrepreneur who founded the social network VK. Just weeks ago, the Russian government worked to ban the messaging platform due to what it claimed were encrypted messages being exchanged by terrorists planning attacks on both Russian and neighboring soil. Officials had demanded these messages and additional information be handed over, though Durov refused to cooperate, citing invasion of customer privacy as the primary reason.
Following the ban, internet services for other companies such as Amazon were widely disrupted, while Telegram has continued to experience regular usage thanks to the company’s efforts to “redirect traffic through a network of cloud services.”
Did Investors Miss Out?
One source claims that Telegram has already managed to raise nearly $2 billion in a private funding round through less than 200 investors. Thus, the company already has the money it needs to launch the cryptocurrency, which now won’t be released for public sale.
ShapeShift CEO Erik Voorhees, for one, isn’t happy with the development.
The SEC has created an environment where only the rich (aka “accredited investors”) are able to get access to financial deals. The plebeians must stick to the lottery. Telegram Cancels public sale of tokens due to SEC: https://t.co/jHH4LgMvO5
— Erik Voorhees (@ErikVoorhees) May 2, 2018
If this is true, many public investors are likely to feel cheated or left out, as Telegram’s ICO was labeled as one of the largest cryptocurrency investment opportunities to ever take place.
Was it a mistake for Telegram to cancel the ICO? Post your comments below.
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