According to the latest report coming from the Wall Street Journal on Wednesday, popular messaging app Telegram has called-off all its plans for an Initial Coin Offering (ICO) for its own ‘Gram’ tokens.
The latest reports are highly surprisingly considering the fact that Telegram had managed to raise a whopping $1.7 billion in the first two rounds of its token pre-sale. Now a source familiar with the matter has suggested that the company will be using the same funds for the development of its new digital payment platform called Telegram Open Network (TON).
Earlier this year in January, the company announced its plans of launching a “third-generation blockchain” platform TON. In the description of its plans, the company pitched TON to be powered by the blockchain technology and be the next substitute to “Visa/MasterCard alternative for a new decentralized economy.” The platform was also touted to be similar to Ethereum, but many times bigger in size, allowing developers to create thousands of decentralized applications (DApps).
One of the other sources familiar with this matter said that one of the major reasons for Telegram to cancel this ICO due to a big transition in the regulatory environment since the start of the year. There has been an increased scrutiny and tight control of lawmakers like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
Back in February, SEC chairman Jay Clayton had given a stern warning to businesses trying to dodge the registration with the agency. Clayton said: “Many ICOs are being conducted illegally. Their promoters and other participants are not following our security laws.”
Later in March, the agency sent subpoenas to dozens of cryptocurrency companies which even included a few tech companies. However, Telegram’s latest SEC filing shows that the sale might continue but the Gram tokens will only be distributed between institutional investors and high-net individuals who invested during the first two rounds of the token sale while not going public.
Some sources speculate that Telegram has raised enough money itself within the private sale to fund the development of its TON platform and hence it doesn’t consider it necessary to further go for a public sale.
Many investors and experts, on the other hand, have criticized Telegram’s token sale for the shady behaviour of the company which has time and again struggled in order to provide concrete details regarding its fundraiser and fund distribution process.
During the initial pre-sale token rounds, Christian Catalini, a professor and founder of MIT’s Cryptoeconomics Lab who along with this team is currently studying about 1,500 ICOs. Catalini said: “We actually document in our research paper that there has been a major transition from more technical white papers to the kind of white papers that look a lot more like sales pitches. There’s been less focus on technical details over time and, for some of these, much more on selling the vision. In the case of the Telegram one, there is a lot that is being promised and not a lot of clarity on how that would be delivered.”