Telegram cancels $1.7 billion ICO cryptocurrency crowdfund

The messaging app plans to make the world's first mainstream cryptocurrency

The popular messaging app Telegram wants to make cryptocurrency more mainstream by launching its own virtual currency for its 200 million users (REUTERS)

The world’s largest ever cryptocurrency fundraising effort has been put on hold after the popular messaging app Telegram scrapped plans to broaden its initial coin offering (ICO).

The reason for shutting down the public ICO — the process of selling units of a cryptocurrency ahead of its launch — is unclear, though it may be a result of increasingly tight regulations in the space.

Citing sourced familiar with the matter, The Wall Street Journal reported that the current regulatory environment meant the company would be open to scrutiny from organisations like the Securities and Exchange Commission (SEC).

Telegram did not respond to a request for comment from The Independent.

In March, the SEC launched a probe into more than a dozen companies involved in raising funds through ICOs over fears that fraudsters were attempting to profit from the booming interest in the industry.

More than $6 billion was raised through ICO's in 2017, with around $12 billion raised since the first one was launched four years ago. Close to $2 billion of that figure was from small private investors backing Telegram's ICO.

Analysts have questioned the credibility of some ventures, while a recent study suggested that more than 80 per cent of all ICOs were fraudulent.

Telegram's planned cryptocurrency does not appear to fall into the scam category, as set out by the research from the Satis Group, however this can't be properly determined until it properly launches later this year.

A whitepaper published earlier this year that describes the Telegram Open Network (TON) cryptocurrency explains how it aims to overcome limitations with other major virtual currencies like bitcoin.

Building off the same blockchain technology as its more established rivals, TON would improve upon transaction times and fees, while also allowing Telegram's 200 million users to make payments using it.

"To this day, no consensus-backed currency has been able to appeal to the mass market and reach mainstream adoption," the paper states.

"Telegram will use its expertise in encrypted distributed data storage to create TON, a fast and inherently scalable multi-blockchain architecture."