Is Cryptocurrency to Blame for Telegram CEO Pavel Durov’s Arrest?
In the wake of Telegram CEO Pavel Durov’s explosive arrest in France last weekend and subsequent indictment, much remains unclear, particularly how this high-stakes drama will affect Telegram’s massive crypto ambitions.
Powered by Telegram’s blockchain of choice, The Open Network (TON), the dominant messaging service encouraged the proliferation of an ecosystem of on-chain and in-app games and services.
Thanks in large part to their ability to generate crypto rewards for users via token airdrops, these so-called “mini-apps” exploded in popularity this spring. The surge in mini-app activity propelled Telegram to a record 950 million monthly active users in July, and Telegram has been embracing TON directly, using it to pay channel operators a portion of ad revenue and launching an in-app currency called Stars tied to TON.
The firm’s new path seemed boundless, with some TON developers predicting that the app could soon become the Western version of China’s “app for everything,” WeChat, using the mini-chain app model.
Nevertheless, cryptocurrency is also notoriously a legally risky sandbox in which to play. So could the company’s crypto future be in jeopardy now that Telegram appears to have awakened the regulatory beast?
“How Big Do They Want to Become?”
Cryptocurrencies are not mentioned at all in the charges filed against Telegram CEO Pavel Durov on Wednesday. They focus instead on content related to illegal topics such as child pornography and drug sales. Durov allegedly allowed these to proliferate on his platform.
Seth Goertz, a former US prosecutor who specializes in cryptocurrency and cybersecurity, said the timing of the charges is telling. “The more they go down this path, the more they invite scrutiny,”
In particular, the former prosecutor pointed to the integration of the popular stablecoin Tether (USDT) with TON and the Wallet app on Telegram back in April. While the move was a blessing for Telegram’s mini apps, allowing users to conduct transactions in a dollar-denominated currency that doesn’t fluctuate as much as the domestic TON token, the stablecoin has a long history of fueling illegal activity precisely because of that attraction.
Cryptotechnology vs. Attitude towards Cryptocurrencies
Not everyone is convinced that the factors that led the French government to arrest Durov have anything to do with cryptocurrency or any other technology sold by Telegram, which could indicate that the company’s ambitions to have an “app for everything” may not be at the heart of the story.
Ben Rubin, the founder of Houseparty, the once-trendy and now-defunct video chat app, believes that despite this week’s uproar on Crypto Twitter, which framed Durov’s arrest as an attack on users’ privacy rights, Telegram hasn’t stirred too many waters with its actual privacy features.
In Rubin’s view, this created a perfect storm, with Telegram holding a lot of sensitive data about its users but refusing to hand it over. “My intuition tells me that this has nothing to do with cryptocurrencies,” Rubin told Decrypt. “When a platform not only fails to protect user privacy (by not implementing end-to-end encryption), but also pisses off regulators, you end up in the situation you’re in now.”
In that vein, Telegram and Durov may now be in hot water less for their encryption technology than for embodying the same kind of anti-establishment attitude that drove the encryption industry and turned Durov into something of a free speech icon. When French prosecutors announced the charges against Durov on Wednesday, they made a special point of highlighting how Telegram’s failure to communicate with government agencies at all was a crucial factor in making the whole situation worse.
By Leonardo Perez