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Indian Government Panel Suggests Crypto Dealings Should Illegal, Local Sources Say

An Indian government panel has reportedly proposed regulation making cryptocurrencies illegal via the Reserve Bank of India.

An Indian government panel has reportedly suggested a new legal framework within the Reserve Bank of India (RBI) that completely bans cryptocurrencies in the country. English-language Indian media outlet CNBCTV18 reported on the framework on Dec. 6.

The article cites an unnamed source as noting that “the panel has categorically said that all such currencies should be treated as illegal” and that “any kind of dealing in such currencies should be treated as” such.

CNBCTV18 notes that the Indian government had created a panel to create “norms” for digital currencies — headed by secretary of the Department of Economic Affairs (DEA) Subhash Chandra Garg — which submitted its report to Indian finance minister Arun Jaitley.

The debate over crypto’s legality began in April of this year, when the RBI stated it would no longer provide services to persons or legal entities involved with crypto. In response to the ban, eleven crypto-related businesses filed a suit against the bank in the country’s Supreme Court, with the legal outcome still unclear.

As Cointelegraph reported in November, the Indian government is also working on cryptocurrency regulation. The stipulated bill is expected to become public this month.

The current climate isn’t friendly overall to crypto enthusiasts in India. Also in November, the developers of India’s first Bitcoin “ATM” were arrested on criminal charges.

While the charges haven’t been disclosed, local mainstream media reported that they include criminal conspiracy, cheating and forgery. The developers were also the co-founders of the country’s first crypto exchange, Unocoin.

At the same time, one of the leading global auditing companies, Ernst & Young (EY), announced the are looking to hire 2,000 employees in India. The objective is to expand its digital services, including artificial intelligence (AI) and blockchain applications.

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South Korean Startup Presto to File Constitutional Appeal Against Local ICO Ban

A South Korean blockchain startup has announced its intention to file a constitutional appeal against the country’s ICO ban.

A South Korean blockchain startup, Presto, will reportedly file a constitutional appeal over the county’s ban on Initial Coin Offerings (ICOs), South Korean economic media outlet Sedaily reports Dec. 6.

Presto claims on its website that it provides a “total solution to development teams from website building to token issuing.” The startup was reportedly trying to run a Decentralized Autonomous Organization-based Initial Coin Offering (DAICO) in South Korea for the first time.

As Cointelegraph explained in a dedicated guide, DAICOs aim to improve the ICO fundraising method by integrating some features of Decentralized Autonomous Organizations (DAOs).

This fundraising method enables users to use smart contracts to vote for a refund of the funds if they stop trusting the developers or lose faith in the project, Sedaily notes.

As Cointelegraph reported, South Korea banned all ICOs in September last year. Sedaily reports that Presto’s CEO and founder, Kang Kyung-Won declared that the startup has “been hitting a snag as the government and the National Assembly have done nothing over the last one year since the government’s blanket ban on ICOs.”

He then announced their intention to file a constitutional appeal:

“We will ask the court to rule on the ICO ban and the legislature’s nonfeasance.”

Sedaily explains that according to Presto, the ban infringes on “people’s freedom of occupation and property and equal rights and scientist’s basic rights.” Kyung-Won said that given the fast pace of technological development that came with the fourth industrial revolution, “such unconstitutional and pre-modern measures as the ICO ban should not exist any longer.”

South Korea’s stance to crypto regulation stands in clear contrast with other countries like Malta. As Cointelegraph reported in July, Malta has been acclaimed as “the blockchain island” after the local parliament approved three bills that gave the crypto industry unprecedented legal clarity.

The Maltese government is also reportedly working on an artificial intelligence (AI) strategy of which the ultimate objective is to “explore a citizenship test for robots in the process of drafting new regulation for AI.”

That being said, South Korea recently overtook the Maltese crypto exchanges daily trading volume in November according to a CryptoCompare report. In the document, analysts suggest that the reason behind this shift are “competitions, trans-fee mining and rebate programs.”

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China Clamps Down Again — Silences Online Crypto Discussion

China Shuts Down Popular Online Crypto Forums

The second coming of China’s crypto police has seemingly arrived, with the Asian country enlisting measures to cease the propagation of this nascent asset class over the past two weeks.

Most recently, Baidu, China’s most popular search engine, has begun to restrict access to crypto-centric forums, discussion boards, and chat rooms on the country’s intranet, which has become infamous for blocking access to western webpages. Per a report from the South China Morning Post, which originally broke this news, the forums affected, known as the “digital currency bar” and “virtual currency bar,” will be unavailable for any Chinese citizens using the Baidu system.

If any user attempts to access these forums, they will be prompted with a message that states:

“(These sites are closed) in accordance with relevant laws, regulations, and policies.”

It is clear that with this move, the local government is intending to cease any discussion pertaining to crypto assets, so that it may fade out of the public eye and become nothing more than a distant memory. But as the age old saying goes, “rules are meant to be broken,” so it is likely that diehard crypto enthusiasts will eventually find some way to circumvent the ban.

Crypto Event Ban Fever Sweeps Across The Country

As reported by Ethereum World News, Beijing’s Chaoyang district government banned crypto-focused events just last week. According to a government release, all commercial venues, like hotels, malls, offices etc., were thereby banned from hosting any activities or events that put cryptos at the front and center.

While this was bad enough in and of itself, as Chaoyang is essentially Beijing’s downtown equivalent, it was recently revealed that Southern China’s Guangzhou special economic region has made a similar announcement. The Guangzhou Development District, which has been classified as an exclusive special economic zone, now disallows any crypto-related event as aforementioned.

The local government noted that this ban was to “maintain the security and stability of the financial system,” alluding to the fact that regulators see crypto as a potential threat to the government-run financial infrastructure that has been established. Now that two important regions within China have banned crypto events, it is likely that this ‘fever’ will, unfortunately, sweep across major cities in the economic powerhouse in due time.

China’s Relentless Crusade To Curb Crypto

Since the infancy of this industry, China has dominated the landscape, taking a forefront of the development and use of blockchain and crypto in legacy systems. However, as the price of crypto assets surged in 2017, the government began to crack down on the propagation of such assets, by reportedly issuing a blanket ban over cryptocurrency trading and ICO funding.

But this seemingly hasn’t worked, with some weaseling their way around the bans by establishing secret groups and alternative methods of buying/selling crypto with fiat. This has prompted the government to crack down on this industry for the second time. Some of the government’s other measures include banning 124 foreign crypto exchanges, restricting access to eight crypto-centric news outlets on WeChat, and also banning Alipay accounts that have been suspected of facilitating crypto trades.

It is unlikely that the Chinese government will end their crusade anytime soon, but many are hopeful that they will not do their utmost to stamp out crypto entirely.

Photo by Usukhbayar Gankhuyag on Unsplash
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Crypto Media Banned From WeChat In Sudden Online Sweep

Blockchain and cryptocurrency media accounts in China have been banned on WeChat, the messenger app owned by Tencent.

As first observed by Lanjiner, a China-based finance news outlet, among those affected are Jinse, which is backed by Node Capital, and Deepchain, a site supported by several token funds.

At press time, on Jinse’s official Wechat account, none of its previous articles are shown. Instead, a text is posted indicating that the account has been banned.

That message explains:

“Due to users’ complaints and after the platform’s examinations, the account is found to violate ‘Temporary Regulations on the Development and Management of Public Information Services for Instant Messaging Tools’ and all contents have been banned. The account has been prohibited for use.”

The same message is also shown on the account pages for Deepchain, Huobi News and CoinDaily.

It’s not clear at this time precisely why the accounts have been affected. However, newly-enacted rules from China’s government may have played a factor.

The Temporary Regulations on the Development and Management of Public Information Services for Instant Messaging Tool is a set of rules announced and enacted by the Cyberspace Administration of China on August 7.

One of the rules in that release lays the groundwork for accounts to be impacted on the grounds that they must “abide by relevant laws and regulations,” stating:

“The users of instant messaging tools serving in public information service activities shall abide by relevant laws and regulations. For instant messaging service users who violate the agreement, the instant messaging service provider shall take measures such as warning, restriction, suspension, and closure until the account is closed, meanwhile saving the relevant records and fulfilling the obligation to report to the relevant authority.”

Back in March, People’s Daily, the state-run media outlet in China, directly criticized blockchain and cryptocurrency media outlets in China and claimed that these media outlets were helping manipulate the cryptocurrency market.

Notably, Jun Du, the founder and CEO of Huobi, was named in the commentary as “a classic example” of the problem in China’s blockchain media ecosystem.

Usually considered as the voice of the Chinese Communist Party (CCP), People’s Daily’s commentary was seen by some as the government’s call for stricter regulations on blockchain media outlets.

Wechat logo image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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China Now Downplaying Blockchain Could Be Social Construct to Build It Up

China has led the way in terms of harsh regulations to quash cryptocurrencies like Bitcoin. They were the first country to institute blanket bans on ICOs and exchanges, and have never taken to the decentralized and liberal freedoms that comes from cryptocurrencies.

However, that does not mean that China is opposed to the potential revolutionary technology that comes from cryptocurrencies and their underlying base — blockchain. In fact, China is building toward being a nation that separates the decentralized cryptocurrencies from the underlying blockchain.

But, in the latest calls from regulators, the bullishness on blockchain has come under some scrutiny as banking regulators have said that it would be dangerous to mythologize blockchain technology. In a similar vein, another regulator from the People’s Bank of China has reiterated the hard ban on ICOs, stating they will “crush” these operations.

It is confusing to try to understand China’s position on the entire cryptocurrency space as it stands. When they put forward their bans in 2017, it might have looked like it was making a complete withdraw from anything to do with blockchain and Bitcoin. But their subsequent change in attitude to blockchain, with the president, Xi Jinping praising blockchain on March 30 — and news that they are developing their own national digital currency, suggested by a patent filed for a digital wallet on June 26 — makes one question China’s real feelings toward Bitcoin.

What is even more confusing is that the recent downplaying of blockchain, which has been highly regarded in the country, seems to be sending mixed messages. But, it could well be a way to ensure this revolutionary technology does not sweep up the citizens in a wave of hype, which could jeopardize the technology’s true potential.

China’s history with Bitcoin and blockchain

China’s association with Bitcoin has been stormy from the outset. As soon as things started to get a little more serious in terms of mainstream adoption in the latter months of 2017, the Chinese government cracked down severely.

It began with an ICO ban on Sept. 4, as China’s central bank said ICOs are illegal and asked all related fundraising activity to be halted immediately. They issued one the strongest regulatory challenges and set a specific trend for other countries on ICOs.

Soon after the ban, rumors started circulating that the government would be blocking access to exchanges within the state’s borders. Then, on Sept. 15, the rumors were realized as the regulators said that all exchanges must close by Sept. 30.

It was a hammer blow to the Chinese cryptocurrency economy. However, it was not enough to kill it off completely as traders were still managing to get around the bans and blockade to the exchanges.

Finally, China was able to make itsknockout punch when it erected its firewall on February 5 that blocked foreign crypto exchanges from being used in the country. Since then, China’s national currency — the yuan — has been reportedly only making up 1 percent of the global cryptocurrency transactions — whereas in 2017, Chinese exchanges accounted for over 90 percent of the global crypto industry.

The move to blockchain without Bitcoin

This clampdown was not because China was thinking cryptocurrencies couldn’t work, or that blockchain was not a good technology, it was more based on issues of control in the Socialist Republic.

China has strick capital control rules and has been fighting to keep money in the country for a long time. With the popularization of Bitcoin, it was suddenly much easier for citizens to anonymously — and through a decentralized system — get money out of the country.

But with the central bank and the government effectively quashing Bitcoin and other cryptocurrencies which they could not control, it turned its attention to the power of blockchain technology and all it can offer to a country like China, which is on the forefront of technology and the Fourth Industrial Revolution.

In fact, on May 30, Chinese president Xi Jinping said he considers blockchain as part of China’s technological revolution. This was reiterated when the state-controlled TV channel, CCTV, said that blockchain is 10 times more valuable than the internet.

“The new generation of information technology represented by artificial intelligence, quantum information, mobile communication, Internet of Things and blockchain is accelerating breakthroughs in its range of applications.”

Even looking at Alibaba — China’s version of Amazon — and its attitude toward blockchain over Bitcoin, there are some striking similarities. Jack Ma and his entire conglomerate have spouted the positives of blockchain but have shied away from the decentralized cryptocurrencies.

Boosting blockchain and controlled digital currencies

These statements by people as important as the president seemed to show that China was not looking to shut its doors on blockchain technology, but rather to be in control of it. This became even more evident with the news emanating that the central bank would be creating its own digital token.

On March 9, Governor of the People’s Bank of China (PBoC) Zhou Xiaochuan seemingly outlined the banking sector’s attitude toward cryptocurrencies. He stated that the bank is in no rush to create their own token, but it would be inevitable — and, in the same breath, quashed Bitcoin as a payment system.

“We do not currently recognize Bitcoin and other digital currencies as a tool like paper money, coins and credit cards for retail payments. The banking system does not accept it.”

Downplaying blockchain

So, it would appear that China, its central banks and even its major companies all agree that they have no use for decentralized, uncontrollable blockchains and cryptocurrencies but see blockchain technology as the future and state-run digital tokens as inevitable.

Still, there is the downplaying of the potential of the blockchain, especially in a tech-orientated country like China.

Fan Wenzhong, the head of the international department of the China Banking and Insurance Regulatory Commission, has warned against “mythologizing” blockchain technology, adding that it is hard to call it a revolution.

It seems to be a strong juxtaposition from one of the central bank’s regulators, to suddenly start downplaying blockchain, especially after embracing it since the ban on cryptocurrencies.

However, there is an important line that came from the central bank and its governor, Zhou Xiaochuan:

“If blockchain technologies spread too rapidly, it may have a big negative impact on consumers. It could also have some unpredictable effects on financial stability and monetary policy transmission.”

Herein lies the crux of the central bank’s relationship with blockchain technology as it stands in China at the moment. On one hand, China realizes the potential of block; but on the other, rushing its development in a place like China might ignite a wave of hype that could ultimately derail its potential.

This position is also reiterated by a few citizens in China, who operate with cryptocurrencies and can see first hand what the banking sector is trying to do with its downplaying.

A social construct

Casper Wong, from Goldford Venture — working with blockchain startups and incubation projects across China, Hong Kong, and the rest of Asia — told Cointelegraph:

“Wenzhong is saying this [about the dangers of mythologizing blockchain] because it has generated too many bubbles in the market already. If there is to be a healthy market for blockchain, it needs to be step by step.

“The problem with the cryptocurrency market in China is that it is very fast, I would estimate there are over 20 million crypto investors in the country currently.”

He goes on to mention that the banking system in China might also be fearful of blockchain technology making them obsolete, so instead of letting the whole thing run wild, the central bank would rather build it up slowly and have it be based on their controls.

“It’s the issue all over the world, because blockchain has the potential to destroy the whole banking system. It conflicts with the existing system. And specifically in China, I think the problem right now is the potential for it all to [become a] bubble, so the government officials want to develop it steadily. But the point is they are not banning blockchain, they are encouraging it.”

His sentiments were echoed by Wei Chun Chew, a business analyst for Y3 technologies in Shanghai:

“There’s always the idea that ‘Oh, blockchain and cryptocurrency are going to remove intermediaries, are going to change the world, etc.’ But we know that we are still eons away from that utopian world. But in China, many projects are still money-making schemes. These projects are sprouting all over China, trying to ride on the blockchain wave. But nothing substantial comes out of these projects.”

He goes on to look at the social makeup of the Chinese wealthy elite and just how easy it is for them to get carried away with blockchain projects and potential scams.

“If you can understand China now, a bulk of the wealthier population come from less educated populations who are able to earn their fortune either from the manufacturing boom or the real estate boom. The ban was partly to stop all the stupid money from pouring in to scam projects.

“And the central bank is not creating cryptocurrencies, but rather digital coins to complement their current system. Blockchain, when properly harnessed in certain aspects, will aid their governance and overall dominance over its people.”

Chew gives more insight into the daily lives of blockchain, Bitcoin, and cryptocurrency enthusiasts in China.

“The Chinese government is trying to tone it down. In late 2017 and early January, the words Bitcoin and Ethereum were a taboo in Chinese society. You didn’t see people talking about it on the street or on social media. Blockchain is the ‘appropriate’ word to use even now.”

Protecting and controlling the citizens

The central bank’s relationship with cryptocurrencies is pretty straightforward, but the way in which it is reacting to blockchain is causing some confusion — especially to outsiders and the media. However, looking at it from the perspective of the Chinese government in relationship to the people, it becomes more understandable.

China is a country of control and one where the government is in charge of protecting its people. They have stamped out Bitcoin and the like for the dangers they could potentially pose, but those dangers — scams and bad blockchain businesses — still exist.

Cointelegraph looked to reach out to a number of major cryptocurrency and blockchain ventures that still find their home in China, even with its hard-nosed attitude toward companies not backed by the state. Requests for information were either ignored or denied, giving real insight into the difficult relationship the regulators have with cryptocurrency and blockchain projects that are out of their control.

Blockchain may be the prefered term, but that word can still lead to hype and excitement which can be used as a tool for scams. For the government to tone down the blockchain space until it is ready to flourish could be another form of protection — as well as control.

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India's Supreme Court Pushes Crypto Banking Ban Hearing to September

A Supreme Court decision on the Reserve Bank of India’s (RBI) efforts to bar cryptocurrency firms from receiving banking services will have to wait – for now.

A final hearing on the ban’s merits has been deferred to September 11, local news outlet Inc42 reported Friday. The panel of judges overseeing the case want all arguments and submissions from both the RBI and the ban’s critics to be submitted by that day. While it is not clear when a decision will be made, Rashmi Deshpande, a lawyer representing Kali Digital, which runs an exchange, said she expects the Supreme Court to “dispose of the case” the same day.

The ban began in April, when the RBI announced that regulated financial institutions would be prohibited from servicing cryptocurrency exchanges and other related businesses. The Supreme Court upheld the ban earlier this month pending Friday’s hearing.

Though the scheduled hearing was expected to include all final arguments to the case, the fact that certain organizations, including the Securities and Exchange Board of India, have not submitted their evidence resulted in the delay.

Speaking to Quartz India, Deshpande remained hopeful about the matter, saying:

“Our expectation is that the hearing will be on the basis of merit where we get to present the case on why the RBI circular is unconstitutional and should be quashed.”

At the same time, it was reported by the Bar and Bench that a senior advocate representing RBI said in today’s hearing that  “the policy of RBI is of extreme caution,” adding that cryptocurrencies had the potential to encourage illegal transactions.

Waiting room image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Report: China’s Cryptocurrency Ban Sees Successful Results

China – Late last year as Bitcoin ran up to all-time highs, China’s government imposed a controversial ban on cryptocurrencies. This move caught many off-guard, as China has historically been a country of cryptocurrency development and interest.

Recent data from the People’s Bank of China (PBC) indicate that the unwelcome crackdown was met with widespread success, with the PBC noting that cryptocurrency trading in China has all but gone away.

The Asia Times, a popular Hong Kong-based media source, recently reported that the Chinese yuan (RMB) is now utilized in less than 1% of all Bitcoin exchange trades. This 1% figure is a far cry from just one year ago, where the BTC/RMB pair accounted for over 90% of all global trades before the ban fell into place.

Guo Dazhi, research director at Zhongguancun Internet Finance, discussed his thoughts on the ban with news source GlobalTimes, saying:

This indicates that the policy has been very successful. It is within expectations that the yuan’s share in global Bitcoin transactions would drop after China announced the ban.

The report further notes that Chinese regulators have not thought about lifting the ban on cryptocurrency trading within the near future, citing large financial risks for Chinese investors. 

Chinese media also claims that regulators have shut down 88 cryptocurrency exchange establishments, and 85 ICO projects since the ban occurred. However, some exchanges have escaped the heat, with Binance, OKEx, and Huobi recently establishing operations in more crypto-friendly nations. 

However, these regulatory actions were not enough for Chinese authorities, as regulators utilized the “Great Firewall of China” to block exchanges, cryptocurrency services, and ICO sites that are based overseas. As of the end of May, Chinese authorities had blocked over 110 websites which hold relations to the cryptocurrency industry, including Binance and Huobi.

Zhang Yifeng, a blockchain analyst at Zhongchao Credit Card Industry Development gave insight about the regulatory move, stating:

The timely moves by regulators have effectively fended off the impact of sharp ups and downs in virtual currency prices and led the global regulatory trend.

Blockchain, But No Cryptocurrencies? 

Despite holding negative sentiment towards cryptocurrencies, the Chinese government seems to be in love with the concept of blockchain technologies. In a recent speech, Chinese President Xi Jingping, expressed his admiration for blockchain technology, adamantly stating:

A new generation of technology represented by artificial intelligence, quantum information, mobile communications, internet of things and blockchain is accelerating breakthrough applications.

In May, Huobi announced the creation of a “Creative Blockchain Lab” in China’s Hainan Province. According to the Huobi press release, this $1 billion move was sponsored and planned in collaboration with Xi Jingping, along with Chinese regulators. Huobi noted:

It is a national-level strategy that President Xi Jiping, personally planned, personally deployed, and personally promoted.

This is just one of the many moves that indicate that China is moving towards utilizing blockchain technologies in their traditional systems, but maybe not cryptocurrencies, or at least for now anyway.

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Indian Supreme Court Continues to Uphold Central Bank’s Ban on Crypto Dealings

The Supreme Court of India has ruled not to grant interim relief to those affected by the Reserve Bank of India’s (RBI) ban on banks’ dealings with crypto-related businesses, Quartz India reports today, July 3rd.

The Supreme Court has thus yet again refused to stay RBI’s April 6 circular, which had directed all banks to extract themselves from existing relationships with crypto exchanges and traders within three months, due to take effect July 6th.

The central bank’s controversial blockade has prompted both public and industry-led petitions, with some appealing to the courts on the grounds that the decision is unconstitutional.

The Internet and Mobile Association of India (IAMAI), which counts as its members several of the crypto exchanges challenging RBI’s stance, requested today’s early hearing at the Supreme Court. The court had set an initial date of July 20, two weeks after the ban will have taken effect.

At a previous petition hearing on May 17, IAMAI was reportedly requested to submit a representation against the central bank. Nischal Shetty, CEO of crypto exchange WazirX, is quoted by Quartz India saying:

“We had submitted a detailed presentation that could have given RBI a clearer picture on what is blockchain, how the exchanges work, etc. But we hadn’t heard back from them yet. Today, the supreme court has also directed the RBI to respond to those representations made by the firms in the next seven days.”

A Twitter post from a team of Indian lawyers involved in crypto regulatory analysis confirms that the Supreme Court has today directed RBI “to respond with reasons” to the IAMAI’s representation. The Supreme Court will hear existing petitions at the aforementioned July 20 hearing.

Notwithstanding its hardline stance against decentralized cryptocurrencies, RBI is said to be  considering issuing its own central bank digital currency (CBDC).

Some remain optimistic about the country’s future in crypto, with Ripple (XRP)’s global head of infrastructure innovation saying earlier this month that he expects a positive regulatory framework to be forthcoming from RBI in the longer term.

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Facebook Relaxes Ban, Accepts Some Crypto Ads

Facebook is easing its ban – sort of – on ads related to cryptocurrency.

The social media giant has launched a “cryptocurrency products and services onboarding request” form that will allow some companies to get their ads on the platform, according to a blog post published Tuesday.

Facebook, however, won’t allow advertisements for initial coin offerings or binary options. The prohibition on these remains in effect months after Facebook first took action against crypto-ads in a move that was followed by similar actions by Twitter, Google and other major sites.

The request sheet shows that the social media company wants specifics on the kinds of services companies wishing to advertise offer. For example, Facebook asks whether companies have the relevant licenses in order to operate, or if they are a publicly-listed company. Facebook has also published a legal addendum outlining its policy toward cryptocurrency ads.

Notably, the social media company suggested that its policy could see additional tweaks in the future.

Rob Leathern, product management director for Facebook, wrote in the blog post:

“Given these restrictions, not everyone who wants to advertise will be able to do so. But we’ll listen to feedback, look at how well this policy works and continue to study this technology so that, if necessary, we can revise it over time.”

The move has won early plaudits from the cryptocurrency PR space.

Trey Ditto, the founder of Ditto PR, a crypto public relations firm, described Facebook’s shift as “the first step in allowing credible blockchain projects, crypto companies and ICOs to get in front of new potential customers and investors.”

“This will be a big boost for Facebook advertising revenue as the majority of projects out there are interested – and have the money – to run paid ads,” Ditto added.

Facebook ads page image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Telegram Digital Resistance: The Open Network And Russia’s Ban

Telegram has been called the “cryptocurrency world’s preferred messaging app” by many media outlets including Forbes, and more than 84 percent of Blockchain-based projects have an active Telegram community.

For over 48 hours now, Telegram has been under a ban by internet service providers in Russia. This was triggered by Telegram’s refusal to give encryption keys to Russian security agencies.

Telegram’s founder, Pavel Durov, said that they have not seen a significant drop in user engagement since the beginning of the ban. In fact, users have bypassed the ban by using VPNs. Durov has said that he will be giving Bitcoin grants worth millions of dollars to individuals and companies running VPNs, calling this the “Digital Resistance”.

Telegram launch, founders and users

Telegram was founded in 2013 by brothers Nikolai and Pavel Durov from Russia. Previously, they notably founded the “Russian Facebook” called VKontakte. In 2014, however, they sold and left the company due to a clash with the government regarding users’ privacy and freedom of speech.

Telegram already had 100 million monthly active users by February 2016. It was recently announced that this number has now reached 200 million.

Based on data from Tokenmarket, Telegram has more ICO discussion groups than any other messaging application as shown by the graph below from Telegram’s ICO white paper.

Official ICO discussion groups

Image source: Telegram’s ICO white paper, page 12

The number of Telegram followers of a crypto project as well as the rate of growth of the community has been used as a metric for success by investors. Some projects even reach the limit of 50,000 followers and they create a second group.

The Telegram Open Network (TON) will be the launch pad for “The Open Network” and in 2021 the “Telegram” name will be dropped, as clearly stated in the white paper.

“By 2021 the initial TON vision and architecture will have been implemented and deployed. TON will then let go of the “Telegram” element in its name and become ‘The Open Network’.”

Telegram ICO goals, funding rounds and amount raised

In the white paper Telegram identifies several challenges for mainstream adoption of Blockchain technology and cryptocurrencies: scalability, complexity for the average user and availability of goods and services that can be bought or sold with cryptocurrencies.

Given that Telegram could not find any existing Blockchain platform that would allow taking cryptocurrencies mainstream in 2018, they decided to develop the required Blockchain platform themselves.

So far, Telegram has conducted two pre-ICO rounds of 850 mln dollars each for a total of 1.7 bln dollars raised, although the number of investors for each round was under 100. A third pre-ICO round may be considered and, if Telegram decides to do an ICO, they could raise a record amount of up to $2.6 bln.

The development team will keep 4 percent of the tokens with a four-year vesting period while 52 percent will be for the TON Reserve and 44 percent for investors. It is expected that investors will receive the TON tokens (Grams) in Q4 2018.

It is also worth noting that some prominent investors in the crypto space have actually decided not to invest in this project, as pointed out in some articles.

TON vs others

So far, some of the largest ICOs have been Filecoin ($257 mln), Tezos ($232 mln) and Polkadot ($145 mln). The TON technical white paper provided a comparison table with some projects.

Chart

Image source: Telegram’s ICO technical white paper, page 74

According to the white paper, TON positions itself as a “5th Generation” Blockchain. Telegram’s plan with this ICO is obviously to build a Blockchain platform similar to Polkadot, and not just a better app. Telegram’s user base could help to launch this new Blockchain platform with its 200 million current active monthly users.

Polkadot, which appears in the table as a 4th Generation Blockchain along with EOS and Cosmos, raised a total of $145 mln while TON has already raised $1.7 bln in the two pre-ICO rounds. It will be extremely interesting to see which innovations TON will develop with this huge amount of money.

Russian ban

Currently based in Dubai, the Telegram team is under pressure since Russia’s Federal Security Services (FSB) is ordering them to hand over the encryption keys.

Telegram has appealed the decision but, given that Telegram’s founders were forced to sell their previous company after losing a legal battle with the Russian government, the situation is very concerning. The main benefit that Telegram offers to its users is privacy and security; if they give the encryption keys away, users’ private information would then be compromised.

Moreover, Russia isn’t alone in demanding access to encrypted messages. Iran also asked Telegram in recent months for information and requested the blocking of several channels. Iran’s Interior Minister Abdolreza Rahmani Fazli said the misuse of social networks such as Telegram by some individuals was “causing violence and fear” and that “such behavior will be smashed”. Durov responded to Iran on Twitter:

Recently it was announced that Russia will finally ban Telegram messenger over the encryption dispute. Russia accounts for only about 7 percent of the Telegram user base, but it could be important to Durov because it is his country and because it constitutes a precedent of a real battle for the freedom of expression.

However, given Telegram’s importance to the crypto community as the preferred messaging app, its active user base of over 200 million, and also its use as a metric of success by investors, it is likely that banning Telegram would not be an easy task even for Russia.

Telegram’s founder Durov confirmed the ban from Russia recently on his official Telegram channel, as well as the importance of VPNs:

“Despite the ban, we haven’t seen a significant drop in user engagement so far, since Russians tend to bypass the ban with VPNs and proxies. We also have been relying on third-party cloud services to remain partly available for our users there.

To support internet freedoms in Russia and elsewhere I started giving out bitcoin grants to individuals and companies who run socks5 proxies and VPN. I am happy to donate millions of dollars this year to this cause, and hope that other people will follow. I called this Digital Resistance – a decentralized movement standing for digital freedoms and progress globally.”

How to circumvent the block

There are different methods of circumventing the block:

Proxies

Proxies are the first option, which give users anonymity by hiding their IP addresses. However, they do not protect the data by encryption from the Internet Service Providers (ISPs).

VPNs

VPNs offer this data protection from ISPs to users. The possible problem with traditional VPNs is that users are shifting their trust from their ISP to a centralized VPN. These VPNs have users’ information that they could give to a government or a law enforcement agency if requested.

dVPNs

This is why decentralized VPNs (dVPNs) are the next step for users’ anonymity and data protection. Decentralized VPNs are using Blockchain technology and are backed by renowned investors such as Sequoia, Andreessen Horowitz, and Tim Draper’s DFJ.

While Russia and Iran are trying to ban Telegram, they could face strong resistance from the users who might start using services such as decentralized VPNs.

Furthermore, the huge amount of funds raised by Telegram in their two pre-ICO rounds means that they have a lot of resources to improve their services and to protect themselves from attempts to obtain the encryption keys or to ban the app.

Digital resistance

Telegram plays a key role in the crypto community and beyond in ensuring the security and privacy of its users. Even Edward Snowden, who previously criticized Telegram’s security model, now supports Telegram’s resistance and its leadership against the Russian government’s limiting actions.

These bans might actually help attract more people from the crypto community as the messenger improves its efforts to keep users’ information anonymous and secure.