Digital assets from a blockchain project linked to Telegram Messenger LLP have lost about $2.7 billion (around Rs 22,670 crore) in market value, reflecting uncertainty triggered by the arrest of the messaging app’s co-founder.
The Open Network’s (TON) token Toncoin fell by more than 20 percent after Pavel Durov was arrested at a Paris airport on Saturday on charges of failing to take steps to prevent criminal use of Telegram.
The 10th-largest crypto asset recovered some of its losses and was trading at $5.58 (around 470 rupees) in London as of 2:11 p.m. on Monday, but the drama involving the 39-year-old Durov still saw it fall by more than 16 percent, according to data compiled by Bloomberg.
The open network — or TON — blockchain has access to Telegram’s 900 million monthly users through partnerships and aims to enable services like in-app payments and gaming. TON’s growth has sparked speculation that Telegram is poised to become a “super app” in the mold of Chinese giants like WeChat.
Venture capital support
The three-year-old foundation behind the project says it is independent from Telegram. But Telegram’s ties to TON have made the latter one of the most hyped cryptocurrency initiatives. Pantera Capital Management LP in May described its purchase of Toncoin as the largest investment in the company’s history.
Billionaire Durov is also the CEO of Telegram. The Dubai-based company issued a statement saying it complies with European regulations, including the Digital Services Act, and that Durov “has nothing to hide.”
“It’s too early to tell” what impact Durov’s arrest will have on Telegram in the long term, said Richard Galvin, co-founder of hedge fund DACM, which bought TON tokens in a private round in early 2023. The market reaction over the weekend “has factored that uncertainty into the price of TON” for now, he added.
Galvin said that a key benefit of the TON-Telegram relationship is “the ability to introduce Telegram’s massive user base to cryptocurrency functionality” and that “anything that weakens Telegram’s competitive position is negative for TON.”
Debate on freedom of speech
Governments have criticized Telegram’s relatively lax approach to content moderation for encouraging crime, while free speech advocates have praised the platform as a place for open discussion. Telegram is popular among the cryptocurrency community, for example for sharing investment tips.
“While there are communities that use Discord, Signal, and X for group communication, the cryptocurrency ecosystem has a disproportionately large dependence on Telegram,” said Stephany Zoo, head of ecosystem at market maker Caladan. “If Telegram gets affected, there will be repercussions.”
On his social media account, TON X joined the likes of Elon Musk in expressing support for Durov, reposting the hashtags #FreePavel and #FREEDUROV and changing his logo to “Resistance Dog” in another gesture of support.
The value of assets locked on the TON blockchain surged this year to a peak of $1.1 billion (around Rs 9,230 crore) last month, but that number has now fallen to $667 million (around Rs 5,600 crore), data from DefiLlama shows. Toncoin’s price has more than tripled in the past year, and the token has a current market value of around $14.4 billion (around Rs 120,880 crore), according to CoinGecko.
© 2024 Bloomberg L.P.
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