How Is Durov’s Arrest Connected to Telegram’s Crypto Expansion?

Telegram’s founder was arrested in August in France. While the reason given was his connection to criminal activity on the platform, Telegram’s activities in Web3 could be the real cause. Like in Facebook’s Libra/Diem case, authorities can be sensitive to private money initiatives by large social networks.

Pavel Durov, the founder of Telegram, was arrested in France back in August. Child pornography distribution and drug trafficking accusations painted an alarming public image. The main charges were reportedly related to Durov’s refusal to cooperate with French authorities, however, Durov denied disregarding authorities’ requests.

🇫🇲 Child abuse is a disturbing topic that causes grave concern and justifies authorities’ enforcement actions. Currently, the EU is working on a new controversial proposal for generalized image scanning, which mandates client-side scanning on encrypted messaging platforms to detect illegal materials but at the same time puts clients’ privacy at risk. Searching for child pornography is the main justification here as well.

All major messenger apps have, at some point, faced charges related to content moderation, but this time, the government seems to be overreaching. Telegram was relatively cooperative with the regulators in Germany, Brazil, and Russia in similar cases (although protecting users’ general privacy and freedom of speech by refusing to share the cryptographic keys). The messenger reportedly satisfied almost 7,000 legal requests in India just this year. These contradictions have led to the appearance of several theories about the real reasons behind Durov’s arrest.

While some believe that Durov, the main defender of online freedom of speech, is being persecuted by evil authorities hunting for private information and others are shouting about drugs, terrorism, and prostitution, the truth might be somewhere in between, in the sensitive and critical currency sector.

In general, states worldwide are extremely nervous about cryptocurrencies, which might both replace fiat money, cut off their seigniorage revenues, and deprive governments of control over trading and financial relations.

When Durov first created The Open Network (at that time Telegram Open Network) and its native coin, Gram, designed to be used for everyday payments within the messenger, the authorities firmly told him to stop. After Gram’s successful ICO, the U.S. SEC banned the coin in 2019, forcing Durov to return more than $1.2 billion to investors and to pay an $18.5 million civil penalty. The project was formally abandoned by Telegram and passed to the “community.”

In 2023 @Wallet bot was launched within the messenger, indicating that Telegram was back on the crypto scene. Although Durov claimed that TON and Telegram are not the same as the offerings from 2021, the companies are working closely on developing Telegram Web3 features. This year, Telegram entered into a partnership with Tether, the largest stablecoin, and regulators’ headache, allowing users to send USDT on TON within the app. Over the last few months, trending mini-apps have attracted millions of users to the platform, making Telegram x TON one of the fastest-growing blockchain ecosystems and promoting its native payment system.

Authority anxiety might be the real reason behind their feigned discontent. Some suggested that the arrest and the investigation were orchestrated by U.S. intelligence, which pursues those related to mixers and crypto-to-cash services worldwide. Durov mentioned earlier that the FBI was even trying to recruit a Telegram employee.

Although unconfirmed, the allegation sounds entirely possible, as this is not the first time U.S. authorities have tried to prevent large social networks from entering the crypto space. It is a similar story to the Libra/Diem stablecoin payment system developed by Facebook. The crypto project by social media giant was shut down in 2022 due to U.S. politicians and regulators’ pressure and concerns.

🥷Russian pro-regime newspapers and experts suggested that Durov’s arrest might be used to get Telegram’s encryption keys and access secret military information, thus turning the messenger, now the main communication channel at the front, into “a NATO tool.” From their point of view, the whole operation targets the keys and private data stored in Telegram.

Pavel Durov was shortly released on bail and barred from leaving France for six months. Since then, the messenger has seen several functional changes, including removing the People Nearby feature and updating Telegram Search to address questionable content issues.

At the same time, the company unified its privacy policy across different countries. Durov shared that in Europe, there was an uptick in the number of valid legal requests in Q3. Although he explained it by the fact that the authorities simply started to use the correct procedures, this doesn’t seem to be a simple coincidence when put into the context of Durov’s arrest. Allegedly, the messenger founder greenlighted such requests.

Telegram Wallet Under Regulatory Pressure in the UK and France

Although no direct announcements of any changes to the Telegram crypto initiative were made, the changes affected @Wallet as well. The app now also supports law enforcement evidence collection and recently applied for UK registration as a CryptoAsset provider “following an internal decision and corporate restructure plan.” For the time of the process, it limited several features for the existing UK customers. @Wallet is also rumored to be banned in France following the same internal decision and plan.

So far, there is no confirmation that the authorities managed to slow down Durov’s crypto crusade, but the @Wallet-related compliance issues might indicate that the authorities’ pressure has taken its toll.

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How Is Durov’s Arrest Connected to Telegram’s Crypto Expansion? was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.