Telegram Gives Up On Cryptocurrency Operation After Court Fight With SEC

[HOLD] Telegram is closing its crypto-focused subsidiary, Telegram Open Network (TON), and giving up on its Gram cryptocurrency projects after losing its court battle with the SEC.

Founder and CEO of Telegram, Pavel Durov, announced on his channel Tuesday that Telegram is stopping its involvement with TON. He warned investors to not trust any other sites using the ‘TON’ abbreviation of the Telegram brand to promote their projects.

According to the Verge, the announcement is coming after years of drama with the U.S. Securities and Exchange Commission (SEC). After TON failed to register an early $1.7 billion tokens sale, the SEC ordered Telegram last October to halt sales of its Gram digital currency. Telegram has raised the funds in a series of 2018 pre-ICO offerings, but due to increased SEC scrutiny, it had to cancel the ICO.

According to the SEC’s statement, they were concerned Telegram may put on the markets billions of coins coming “through an unregistered offering of securities” and that “would violate the federal securities laws”. SEC is against most of the cryptocurrencies. Even if Americans are not entirely banned to own them, the problem is that digital currencies don’t provide investor protections.

According to Forbes, after leaving his native country because the Russian government wanted the encryption keys to his Telegram social media firm, Durov encountered new challenges in the U.S. Here, New York’s Southern District court banned the Gram digital currency from being distributed in the country, and the TON platform was not allowed either.

According to Durov, the technology his company created allowed for a decentralized, free and open exchange of ideas and value. His TON platform had the potential to bring a revolution in the way people transfer and store information and funds. However, keeping his project alive would be too difficult after losing the legal battle with the SEC.

TON was a cryptocurrency platform designed to offer decentralized digital currency to anyone owning a smartphone. Telegram’s project was somehow similar to Facebook’s Libra project, which has also faced regulatory pressures and significant scrutiny from the SEC.

According to the Verge, following months of severe political pushback and regulatory pressure, in March, Facebook had to alter its plans for Libra digital currency project. Facebook announced it no longer intends to make the Libra token the main mean of its digital payments. Instead, the social media giant will transition to supporting both the Libra token and existing government-backed currencies, like the euro and the U.S. dollar.