Cryptocurrency organizations have always had clashes with regulatory agencies and as time progresses the winds have been changing. In recent weeks, one major case involving the messaging platform Telegram and the Securities and Exchange Commission [SEC] has taken the case.
Touted to be one of the biggest cases in cryptocurrency history, several sectors of the fintech market, as well as the mainstream market, have sat up to take notice.
The issue pertains to the SEC taking Telegram head-on over its $1.7 billion token sales back in 2018. The Securities and Exchange Commission [SEC] stated that the Telegram had violated investor protection laws during the function. It claimed that Telegram token was actually security and not a currency, thereby subjecting it to a different set of laws.
The ongoing issue touches other things as well, such as the fact that it tests a rare two-part deal structure that the messaging platform used to hide from prying eyes. The SEC faces an uphill battle, however, because Telegram was not a weak opponent. Being used to scammers who swindle money using, Telegram acts as a different ball game after having Wall Street firms on their roster.
Companies like Kleiner Perkins Caufield & Byers and employees from SoftBank and Fortress investment were also a part of the group. Kenneth Herzinger, a partner at Orrick Herrington & Sutcliffe LLP had said:
“This is the biggest SEC cryptocurrency case yet. They have it all out on the line, and they’re pulling out all the stops. Until now, no court has dug into and addressed any of these complex issues before. If the SEC loses, it will certainly ripple through the industry.
Law enforcement agencies in the United States have also been wary of Telegram’s user base. Telegram’s encryption feature was also seen as a concern by the SEC. At one point, some ISIS proponents also used the messaging platform along with protestors in Hong Kong.
Telegram has deflected the claims made by the SEC thoroughly and explained why it skipped it. According to Telegram, it circumvented the SEC because investors did not actually receive the asset known as grams. By the time they receive Grams, the coin would be a commodity and out of its reach. The SEC countered by claiming investors were into the product only because of its profit-making capabilities. This sentiment made it look like an investment rather.
Companies such as GV, the venture capital arm of Alphabet had also considered investing in Telegram’s Grams. The lack of information surrounding this has been the major cause of this uncertainty.