New Cryptocurrency Planned by Messaging App Telegram
August 29, 2019
Social network Telegram is moving ahead with its plans to issue its own cryptocurrency, dubbed Gram, within the next two months. The 200 million to 300 million global users of its messaging app will also have access to Gram digital wallets. Telegram appears to have the same ambitions for Gram that Facebook has for its Libra cryptocurrency: as a way to move money worldwide. In early 2018, Telegram tapped $1.7 billion from prominent investors including major Silicon Valley venture capitalists to launch the fund.
The New York Times reports that “unlike Facebook, which released public plans for its digital money long before the first token was ready, Telegram has largely proceeded in secrecy,” which likely means that it will face more questions as it evolves.
“Anyone trying to build this type of token system has to be careful on any number of levels with regulators,” said Polsinelli attorney Richard Levin, who specializes in cryptocurrency law. “I suspect that regulators will take a very close look at this offering.” Self-described libertarian Pavel Durov, who “fled Russia after clashing with the government,” founded Telegram.
Telegram allows users to easily send encrypted messages between smartphones, which “has made it popular both with terrorists and with government dissidents and protesters, most recently in Hong Kong … [and] unpopular with governments in Iran and Russia.” NYT said the Gram sales pitch revealed that it “will operate with a decentralized structure similar to Bitcoin, which could make it easier to skirt government regulations.” The decentralized network will also “give Telegram no control over how and where the coins can move.”
The cryptocurrency community is skeptical, with “many of the largest venture capital firms that have invested in cryptocurrencies pass[ing] on the chance to invest in it.” Others pointed out Telegram’s past security problems. Still, U.S. venture capital firms Benchmark and Lightspeed Capital and “many Russian investors” contributed to the Gram fund, “in exchange for the promise of future Grams.”
In legal documents, Telegram vowed that “it would deliver Grams to investors by Oct. 31, 2019, or give back the money.” Early investors agreed to a holding period for selling Grams, but others will be able to sell their Grams immediately.
Whereas Facebook’s Libra is intended to be backed up by conventional currencies held in bank accounts, the Gram “will be backed by nothing and gain or lose its value, like Bitcoin, by whatever someone is willing to pay for it.” According to investors, Telegram will release a test version of the Gram network in the next couple of weeks. Cryptocurrency analyst/critic David Gerard said he doesn’t “see how on earth Telegram can possibly get something compliant with regulators in place by the end of October.”
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