I’ve spent today working on the ICO book chapter about the Telegram ICO — expanding this blog post into book-quality text. The fun part is that the story isn’t finished, and the next act resolves on 31 October.
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Telegram sold $1.7 billion of SAFTs on GRAM tokens to large corporate investors in early 2018 — options on future tokens, to be issued when the Telegram Open Network (TON) is up and running. That’s $1.7 billion of actual US dollars, by the way, not cryptos.
Telegram promised various technical nonsense in the white papers — but the important bit is the sales agreement for the SAFT.
The idea is that Telegram pre-sold 2.89 billion GRAM tokens for $1.7 billion, in two offerings. These GRAMs will be issued when the TON goes live.
The sales agreement (section 5.2, page 15) warrants that Telegram will build a GRAM wallet into Messenger:
To the extent permitted by applicable law, Governmental Authorities, and technology and mobile platforms, the Parent shall use its reasonable endeavours to facilitate the use of Tokens as the principal currency used on Telegram Messenger by building TON Wallets into Telegram Messenger.
That’s the success criterion. If they can’t get that running, to the best of “reasonable endeavours” … they have to give the $1.7 billion back.
It wouldn’t be hard to set up a centralised network, say “decentralised!” a whole lot, put tokens on it, and put an interface to that into Telegram Messenger. You could even hang a Merkle tree ledger off the side, and call the resulting thing a “blockchain”.
The trouble is — how to make the investors’ 1.7 billion GRAM tokens worth anything? How to make it a “currency” that is, in fact, used?
(And — how can the investors cash out?)
Making GRAMs any sort of currency requires interfacing to the real world of actual money, and goods and services. The big problem there is Know-Your-Customer anti-money-laundering (KYC/AML) regulations, and money transmission laws.
Telegram’s plans for GRAM look very like Facebook’s plans for Libra — a large network runs a token as a private interchange currency, with completely private issuance, with questionable backing.
This is precisely the thing that Libra has regulators up in arms about, just recently. A mere $1.7 billion worth of credit-as-money is not enough to be a systemic risk — but I’ll be frankly amazed if regulators don’t ask just what Telegram think they’re doing.
I don’t see how on earth Telegram can possibly get something compliant with regulators in place by the end of October.
And, if they fail — how they can show, within the reasonable parameters of contractual assumption of good faith, that they have really, really, tried their very hardest … given their investors are seriously cashed up entities with the finest lawyers on tap.
I wonder how Telegram’s regulatory efforts are going. Has anyone heard anything?
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1. Libra is a copy of TON/Telegram and not vice versa
2. It would appear that Telegram has been treading quite carefully on the regulatory side, eg token issue was registered with SEC
3. Read the Financial Action Task Force (FATF) report on DLT and you will note that non-custodian wallet providers are not subject to AML legislation
Yes, Libra draws from the same pool of ideas as TON. They trod carefully regarding the offering – but the coin is an entirely different regulatory regime, and can of worms.
I think “non-custodial” is a big question here, and I also think Telegram will have problems showing they don’t functionally run the network.
But hey, maybe it’ll all be fine!