TON: Telegram’s decentralized blockchain network face mixed reactions from financial regulators as more information is needed

Telegram is now joining the blockchain league with Telegram Open Network (TON), Telegram’s blockchain network. TON will integrate blockchain payments to 365 million users of Telegram by the end of October. 

Earlier this month, Telegram released half a million lines of code for TON, new documentation, and a beta. According to Decrypt, “If TON delivers on promises of high speeds and decentralization, it’d be the largest blockchain launch in history.” 

Regulators raised their voice against Facebook’s Libra 

Regulators had raised their voice against Facebook’s cryptocurrency, Libra and Libra’s launch has been pushed since it can lead to serious security issues. While Congress has already drafted bills to ban Libra. 

Maxine Waters, chairwoman of the Committee on Financial Services said in the letter to Facebook, “It appears that these products may lend themselves to an entirely new global financial system that is based out of Switzerland and intended to rival U.S. monetary policy and the dollar.”

It further reads, “This raises serious privacy, trading, national security, and monetary policy concerns for not only Facebook’s over 2 billion users, but also for investors, consumers, and the broader global economy.”

France is blocking Libra, according to The Independent, Bruno Le Maire, Economy and Finance Minister of France, said, “I want to be absolutely clear: In these conditions, we cannot authorize the development of Libra on European soil.”

Regulators need more information on TON, hence unable to judge it

Now the question arises, how will TON survive considering regulators’ strict eye. While most of the regulators haven’t added any comments on TON and few others think that more information is needed on TON.

A spokesperson from the German Central Bank said, “We do not possess any specific information on TON. That’s why we cannot comment on this app.” 

A spokesperson from the European Data Protection Supervisor, a regulatory body on privacy said, “There is not much info indeed.” He further added, “Telegram will have to apply the GDPR; no specific TON regulation is needed here. Telegram will have to fulfill all compliance obligations.”

These comments from the regulators don’t give any clarity based on TON. Mitja Goroshevsky, CTO of TON Labs pointed out that the lack of interest from regulators is because the Facebook-led Libra Association is quite different than TON. According to Mitja, Libra isn’t decentralized, whereas TON is a decentralized blockchain.

Few other regulators think that TON doesn’t violate any laws but might face criticism by certain authorities who protect the financial system. According to others, TON needs to have a model designed wherein it will be responsible for controlling all the validators. 

In a statement to Decrypt, Pavel Prigolovko, Vice President, Strategy, TON Labs, said, “TON has to switch from a model where all the validators are controlled by TON itself during the launch, to one where the community controls the majority of the validators.”

Prigolovko further added, “This transition depends on the technical availability of the large Gram holders to become validators. There are quite a few technical challenges to become a validator, like setting up a reliable infrastructure with proper processes, scripts [and] monitoring.”

TON will require to fulfill KYC details concerning user data

Some of the regulators are sceptical about where will the user data get stored as Telegram hasn’t provided enough details regarding the same. As wallets will be linked, it is important to have certain clarity on where the data will be stored. TON will require the KYC details and users will have to follow the KYC regulations.

Mitesh Shah, CEO of blockchain analytics company Omnia Markets Inc, said that Telegram has given little information about where and how user data is stored. “There are more users here than on any other chain, and having it stored in a proper place is one of the largest concerns.” 

Goroshevsky noted, that neither Telegram nor TON would not require KYC functionality. That said, users will have to adhere to the KYC regulations of individual exchanges when buying or cashing out Grams. 

Though KYC details are unique for an individual but this data can be used by the terrorists as few of them use Telegram to promote their campaigns. Users can make fake accounts and misuse the platform to hide the transfer of money. 

Last month, Steven Stalinsky of Middle Eastern Media Research Institute told Decrypt about concerns that TON would be exploited by terrorists, who already use Telegram to promote violent campaigns. Even if KYC was implemented, Telegram wouldn’t be able to prevent subversive groups from using fake accounts to hide the transfer of money.

On the contrary, according to Goroshevsky, since TON is a decentralized blockchain, it wouldn’t collect user data and it will be transparent.

Goroshevsky said, “TON is not collecting user data hence it is not going to store it. TON is a decentralized blockchain and as any such blockchain, it will be fully open and transparent. And of course, that means all transaction details will be public, like on any other public ledger.”

Considering the mixed reactions coming from regulators, it would be interesting to see if TON gets approval for its launch or faces the same fate as Facebook’s Libra.

To know more about this news in detail, check out Decrypt’s post.

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*** This is a Security Bloggers Network syndicated blog from Security News – Packt Hub authored by Amrata Joshi. Read the original post at: https://hub.packtpub.com/ton-telegrams-decentralized-blockchain-network-face-mixed-reactions-from-financial-regulators-as-more-information-is-needed/