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Telegram has become the go-to app for heroin, weapons and everything illegal. Can cryptocurrencies save him?
“Nothing near the standard you expect. Strong smell of ammonia. Very nervous. One star,” writes one customer unhappy with his $240 Colombian cocaine purchase. Another reviewer reported a better experience, leaving a five-star rating and enthusing, “Better than the street stuff around me! Advised.”
This is not a South American drug market or even an obscure dark web market. His Telegramone of the top five in the world the most downloaded app and the go-to communications platform for everyone from activists to cryptocurrency enthusiasts. A recent Fortune tour of Telegram channels that function like stores revealed that it’s quick and easy to find everything from cans of heroin to stolen stimulus checks to AK-47 machine guns.
Telegram’s end-to-end encryption means no third parties can access user data. But as a result, it has failed to build an advertising economy and regulate content. So to keep the lights on without selling user data or enduring the regulatory oversight that a stock exchange listing requires, the app has turned to cryptocurrency. (Telegram initially created the Telegram Open Network (TON), but abandoned the project due to regulatory concerns. The TON Foundation has since revived blockchain work to preserve the technology, renaming it The Open Network and launching Toncoin.)
If successful, Telegram could become a “excellent app” without needing to clean up its act. But the implications of this run deeper than simply bringing the dark web to the masses: Extremists and criminals running popular channels could earn cryptocurrency for their content.
“Creating a Telegram account is easier than creating a Facebook account,” says David Maimon, a professor of criminal justice and criminology at Georgia State University, who has been tracking thousands of illicit groups and channels on Telegram since 2019. For criminals, “Telegram is now the place to go.”
The dark web in your pocket
Telegram’s philosophy is rooted in its political origins. CEO Pavel Durov created the most popular social network in Russia, VKontakte. In 2014, he was forced to flee after refusing to share his Ukrainian users’ data with the government. Before his expulsion, he had developed Telegram to communicate with his brother, and now CTO, Nikolai, out of fear of government espionage.
With over 900 million active monthly users, Telegram has nearly doubled in size since 2021 and aims to reach 1.5 billion by 2030. Headquartered in Dubai, has “disclosed 0 bytes of user data to third parties, including governments.” As a result, it is difficult to regulate and monetize, leading to a boom in illicit channels. (Fortune messaged Telegram’s PR channel seeking further comment but did not receive a response.)
The dark web itself is slow, requires the Tor browser, and its complex URLs change often. Telegram can be easily found in the App Store. And if anyone can imagine something they want, Telegram almost certainly has it. LSD and OxyContin. Cloned credit cards. Stimulus checks. Twisted paragraphs of stolen identitieswith victims reduced to names, dates of birth, Social Security numbers, emails, passwords, home addresses and credit card numbers. Typing some vaguely related lingo into the app’s search engine gives you dozens of channels, many with tens of thousands of members competing to give you the best deal.
Channels feature drop-down menus, shopping carts, wishlists, and reviews. One “exclusively for members of the credit card industry” offers free tutorials on how to commit fraud, before customers move on to purchasing CVV codes and card clones. “Our hundreds of satisfied customers will attest to the fact that we offer only the highest quality materials for your project. We appreciate your business!” writes the administrator in a broadcast to over 50,000 members. In the most mundane corners, discounted gift cards, flights and hotel stays are traded. “It’s really crazy what’s happening. The spectrum is really broad,” Maimon says.
So attracting big ad dollars has proven to be a challenge. “If you protect data and privacy, you can’t sell ads,” Cosmo Jiang, a portfolio manager at Pantera Capital, tells Fortune. “They’ve been really bad at monetization.”
Telegram launched an advertising platform in 2021. Advertisers can post text messages of 160 characters or less in channels with at least 1,000 subscribers. Telegram channels generate 1 trillion views per month, but only 10% of those are monetized with advertising, Durov She said in February.
Switching to cryptocurrencies
An alternative option for Telegram to make some money is cryptocurrency, which promises the “highest potential to maintain control and monetize,” says Jiang of Pantera, who invested in TON. The funding is from Pantera “the biggest investment ever,” and earlier this month, the company revealed that it is adding cash to its seed money, according to a letter shared with investors and seen by Fortune.
Launched in 2018, the original TON network was abandoned in 2020 following a court battle with the Securities and Exchange Commission. But now, with a more favorable regulatory environment and improved market conditions, the company is diving headlong into cryptocurrencies in a desperate attempt to monetize without bowing to the authorities.
TON aka Toncoin, Jiang notes, is Telegram’s “largest liquid asset on their balance sheet.” It accrues staking rewards from transaction fees and protocol issuance. Additionally, there are “trade deals” where it earns more TON over time based on certain performance criteria, Jiang adds.
Telegram in September saw the launch of a self-custodial wallet called TON Space, built by third-party developers, that lets users send USDT, its native Toncoin, and Bitcoin to other users. Most illicit payments are made outside the app via cryptocurrency, Maimon says, though he has seen “some mentions” of TON wallet payments starting to appear on Russian-run channels. But with the wallet still in its infancy, TON transfers for illicit goods could become more widespread.
Capitalizing on this momentum, Telegram announced in March that channel owners would begin receiving 50% of any revenue generated from ads in their channels, with all payments settled on TON. It also revealed its Mini App feature, which allows users to create apps within Telegram, in a bid to become more like the super app WeChatwhich boasts over 1.3 billion users, mostly Chinese.
Recently, scrolling through some illicit channels, the only ads that appeared were links to rival stores. So, at least for now, criminals who run stores and extremists who broadcast propaganda will be paid in Toncoin for advertising on their channels.
So far, Telegram’s crypto-focused move is working. Toncoin has nearly tripled since March, trading near $7, according to CoinGecko data. The same month as the revenue-sharing announcement, Durov revealed the company is “close to profitability”.
“If TON really takes off, it will never have to go public,” Jiang says. In one channel about stolen stimulus checks, a salesman quotes Lil Wayne: “Fear money doesn’t make money.” In another, a storefront of stolen bank data that broadcasts to more than 27,000 subscribers, the words are: “Put food on the table.”
(This article has been updated to add clarification about The Open Network’s role in the development of the TON blockchain and that the self-custodial wallet integrated into Telegram was developed by a third party.)