Popular instant messaging service Telegram Cancels its Public ICO sale after raising record breaking $1.7 billion in its initial phase. The decision, however not announced officially, has surprised the market players. It’s becoming hard to figure out that why any crypto startup, after such an amazing success would get out of the game. In the initial sale of its ICO, Telegram had raised $1.7 billion only from the 200 participants.
A document from Security and Exchange Commission reveals that the project collected $850 million each in its two rounds. That was a game of big players where requirement for participation was set to a condition of buying minimum of $1 million worth of coins. It also raises concerns on their decision when crypto market has started picking up the momentum and is doing well.
Why Telegram put the restriction of minimum $1 million purchase of tokens
It is a very rare and odd restriction from a startup to restrict the number of investors into their new business. To many, The decision seems a gamble, but on the other hand it is also taken as a confidence in their successful business model.
However, the most striking reason seems to avoid the strict regulations from Securities and Exchange Commission and another regulatory body Commodity Futures Trading Commission.
According to Securities Act Regulation rule 506(c), the companies can sell unregistered securities if they only sell to accredited investors and report the number of funding rounds to SEC. This seems to be the most intelligible reason behind Telegram’s restriction of sale to accredited investors.
What was Telegram’s business model based on?
Unlike others, This business model was aiming to bring the crypto currency to mainstream. To do this, Telegram intend to develop an alternative of Visa/Mastercard through which people could easily withdraw and deposit their money from anywhere. The plan was attractive and even the top currencies like Bitcoin could not offer a solution to this prevailing problem.
Speculations about cancellation of public ICO sale
We have still not heard anything from Telegram officials about the reasons of the ban. One observation is that they have raised sufficient funds to accomplish their objective. One group states that the increasing regulatory pressure might be the reason of this ban. US Security and Exchange Commissions is strictly watching and focusing on the new ICOs. To cut it short, the reason could be anyone from the above mentioned or it could be both.
Is it fear of failing that Telegram Cancels its Public ICO?
This also puts questions on the ability of the team of Telegram. Additionally, People also doubt if they have required technical expertise and knowledge about crypto economies. This got off to a tremendous start by raising billions of dollars. The success of any ICO mainly bases on Finance. Manager of 1confirmation Nick Tomaino said:
“It’s a big name ICO, attracting big-name investors, but I ultimately believe the effort requires deep technical expertise and historical context on crypto-economies, consensus mechanism, and scalability, which they don’t have”
Please also read: NASDAQ Gives a Green Signal to Become a Crypto Exchange