This sudden arrest, followed by a criminal indictment, has left many wondering about the ripple effects it may have on the messaging giant’s crypto initiatives.

Telegram’s Expansion into the Crypto World

This year, Telegram made headlines by fully diving into the cryptosphere, launching a host of blockchain-powered in-app services and games. These “mini apps” gained immense popularity, largely due to their ability to reward users with cryptocurrency through token airdrops. Powered by Telegram’s chosen blockchain, The Open Network (TON), the platform saw explosive growth in user engagement.

Thanks to the rise of these mini apps, Telegram reached an all-time high of 950 million monthly active users in July. The company also integrated TON more deeply into its ecosystem, using the blockchain to pay channel operators a portion of ad revenue and launching an in-app currency called Stars, linked to TON.

Some developers even predicted that Telegram could soon rival China’s WeChat as the Western world’s all-encompassing “everything app,” driven by its integration of blockchain-based services.

Could Legal Troubles Derail Telegram’s Crypto Path?

Despite these optimistic predictions, Telegram’s leap into crypto comes with significant legal risks. The charges against Durov, which focus on illegal content like child pornography and drug sales allowed on the platform, don’t mention cryptocurrency directly. However, the timing of the arrest—during Telegram’s aggressive push into crypto-backed services—raises questions about potential regulatory scrutiny.

Seth Goertz, a former U.S. Attorney specializing in cryptocurrency and cybersecurity, warned that Telegram’s rapid growth in the financial and crypto sectors is likely to attract more regulatory attention.

The bigger they get, the more scrutiny they’ll invite

Seth Goertz

One key moment was Telegram’s integration of Tether (USDT) with TON and the Wallet app in April. This stablecoin allowed Telegram users to transact in a dollar-backed currency, reducing the volatility associated with TON’s native token. However, Tether’s history of being used for illicit activities could raise red flags among regulators.

The Intersection of Crypto Tech and Attitude

While some believe that Durov’s legal troubles are tied to Telegram’s crypto ambitions, others suggest that the arrest has more to do with the company’s attitude toward user privacy and its strained relationship with government authorities.

Ben Rubin, founder of the now-defunct video chat app Houseparty, believes Telegram’s leadership has provoked regulators by refusing to cooperate with law enforcement and holding onto vast amounts of user data without automatic end-to-end encryption, unlike platforms like Signal or iMessage.

Rubin speculated that this situation could have been avoided if Telegram had been more cooperative while also implementing stronger privacy protections. “My intuition is that this has nothing to do with crypto,” Rubin said, arguing that it’s Telegram’s defiance, rather than its technology, that has fueled the current crisis.

The Future of Telegram and Cryptocurrency

In recent days, prominent tech leaders, including Elon Musk and former Coinbase CTO Balaji Srinivasan, have rallied behind Durov, framing his arrest as an attack on privacy rights and decentralization principles.

However, the core issue remains: is Telegram in hot water because of its groundbreaking cryptocurrency innovations, or is Durov’s uncompromising stance drawing the attention of regulators?

As Telegram continues to push forward with its crypto-backed vision, it remains to be seen whether the platform can overcome these legal challenges and maintain its position as a leading player in the cryptocurrency space.