By Elizabeth Howcroft
(Reuters) – A coin called TON has risen in value in recent months, with investors betting that its integration with messaging service Telegram could bring the cryptocurrency to the app’s estimated 900 million users.
Telegram endorsed TON last September, saying the blockchain and associated token would be the “official Web3 infrastructure.” Earlier this month, TON said tokens can also be issued on its blockchain, allowing Telegram users to send the stablecoin to each other within the app.
The TON token has soared, reaching a peak of $7.63 on April 11, up from around $2.21 a year earlier, according to CoinGecko data.
With $18.3 billion in circulation, it is the 10th largest cryptocurrency, after memecoin.
The prospect of a “super app” or “everything app” that unites payments and shopping with social media or messaging services has long been a holy grail for investors, who look to China’s WeChat for inspiration. In the crypto world it is sometimes called ‘SocialFi’, short for social finance.
Such ideas were the driving force behind Elon Musk’s 2022 acquisition of Twitter, now X. Binance, which helped finance the buyout, said it would explore how crypto could be used on the platform. The British Revolut has now approached it from the other direction, starting with a financial app and then adding social functions.
While TON’s appeal is part of the broader interest in super apps, it is also being helped by an overall revival in altcoins, said Thomas Puech, CEO of digital asset hedge fund Indigo.
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“TON outperformed many of its peers as many people bought into the project as interest in alts returned and thanks to support from Telegram,” he said, adding that Indigo had traded the TON token.
TON, short for “The Open Network,” has a crypto wallet product within Telegram with over 6 million monthly users.
LIBRA ERROR
Attempts to introduce crypto payments on social media have so far not been successful on a large scale. Facebook (NASDAQ:), now Meta, has shut down its ‘Libra’ cryptocurrency project after fierce opposition from regulators worldwide, who were concerned it could damage financial stability and erode control over monetary policy.
“The recent foray into crypto payments via Telegram introduces a new use case for the app, but its acceptance and adoption is still in the early stages,” said PitchBook senior analyst Robert Le, who said there has been an increase in venture capital interest in SocialFi.
“The biggest challenge is changing user perception in non-Asian markets, where messaging apps are mainly seen purely for communication and not as multi-functional platforms.”
Such integrations pose “regulatory, technical and security challenges,” said Ram Gopal, a professor at Warwick Business School.
“Regulators may be concerned about how these platforms comply with existing financial regulations,” he said.
“Ensuring users are protected from scams, fraud and potential losses due to cryptocurrency volatility would be a critical concern for regulators,” he added.
HISTORY OF TON
Telegram Messenger created the TON blockchain in 2018 and raised $1.7 billion by selling its associated cryptocurrency. But the project was hit with charges from the U.S. Securities and Exchange Commission, which said the token sale violated federal securities laws.
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As part of a 2020 settlement with the SEC, Telegram agreed to stop developing TON. It has neither admitted nor denied the SEC’s allegations.
A group of unrelated developers then continued to work on the project, picking up where Telegram left off, according to a history on TON’s website.
TON says it is decentralized, based on an open-source codebase, without any controlling authority. There is a non-profit foundation behind it, registered in Zug, Switzerland.
A TON spokesperson said Telegram and TON are clearly separate entities.
The chairman of the TON Foundation is Steve Yun, according to the foundation’s website. Andrew Rogozov, former CEO of Russian social media site VK, is one of the foundation’s founders, according to his LinkedIn profile. He appeared on stage with Pavel Durov, co-founder of Telegram, and Paolo Ardoino, CEO of Tether, at a conference in Dubai where the partnership to issue the stablecoin on the TON blockchain was announced.
(This April 30 story has been corrected to correct the spelling of Indigo CEO in paragraph 7)
