Encrypted messaging app Telegram has canceled its public initial coin offering (ICO) to fund the development of its “third-generation blockchain.”
Citing sources familiar with the matter, The Wall Street Journal reported that Pavel Durov’s led firm determined that it is pleased with the $1.7 billion it had raised for the Telegram Open Network (TON) in two rounds of a private sale and prefers not to bear the operational and regulatory hassles of a sale to the general public.
Documents filed with the Securities and Exchange Commission (SEC) reveal that the company held two funding rounds between January and March and that each round raised a whopping $850 million.
Fewer than 200 investors contributed to the token sale, which was restricted to institutional investors and high net worth individuals who are deemed to be accredited.
The token sale was conducted under Rule 506(c) of Securities Act Regulation D, which stipulates that companies can sell unregistered securities if they restrict the sale to accredited investors, report the funding round to the SEC, and subject investors to a predefined vesting period.
Initial reports indicated the firm may have hoped to raise as much as $5 billion through a private presale and a public ICO. However, one source told the publication that the regulatory winds have shifted since it first began planning the sale. Indeed, the SEC has stepped up its enforcement of ICOs in recent months, and it alleges that most of these token sales are unregistered securities offerings operating in violation of federal law.
Meanwhile, cryptodad chairman of the Commodity Futures Trading Commission (CFTC) J. Christopher Giancarlo feels differently and stated earlier this week that cryptocurrency is a generational interest and that regulators need to treat it with respect.
He explained that younger investors have much less respect for mainstream financial institutions due to growing up amidst the financial crisis and said that they see Bitcoin as a way to remove these middlemen from the financial system.
“There is something going on here that is generational. Just as the baby boomer generation lost faith in the leaders that came before them and tried to seek a cultural change in those days through sex, drugs and rock and roll, I think there is a generation that also has lost faith in us that led them through the financial crisis and they see technology as a way of disintermediating institutions for which they don’t have a great deal of respect.
Giancarlo has also said that Bitcoin is “like gold” in several respects, even though it is perhaps not ideal as a medium of exchange. He further expanded stating Bitcoin has elements of all of the different asset classes.
Telegram was recently blocked in Russia after the company refused to give the Kremlin its encryption keys by a court order.
Russia has also asked Google and Apple to remove Telegram from their app stores.
Bitcoin is currently trading at [FIAT: $9,565.32] down –3.09% according to Coin Market Cap at the time of this report.