The comparison of Gram & Libra, two aspiring cryptocurrency projects
On October 8, users noticed a new section dedicated to the Grams Wallet crypto wallet on the official website of the Telegram messenger. Moreover, the project must be launched no later than October 31, if regulators wouldn’t decide to prevent its release. The launch of Facebook’s digital currency Libra was also announced, and it has to be implemented within the next year. However, it also faces plenty of problems: from terminating contracts with investors, to inspections and interrogations by regulators. Meanwhile, the goals of both companies are quite similar. It is about issuing an alternative currency that will allow you to make transfers around the world.
PaySpace Magazine has decided to compare Facebook and Telegram crypto projects, and has received comments from KUNA Exchange CEO Semen Kaploushenko, who tells us what he thinks about these projects.
What do we know about Gram?
Gram is a cryptocurrency based on the TON blockchain platform developed by the Telegram messenger. In February and March 2018, investors bought the first Gram tokens at a price of $0.37 and $1.33, respectively. The company raised $1,7B during the course of bidding.
On October 2, 2019, Telegram sent letters to investors with links to the TON key generator, which provided access to Gram tokens. As previously reported by the media, this is one of the first batches of digital money that the company is obliged to send to depositors by October 31. However, the release of the project may be delayed upon the decision of the US Securities and Exchange Commission (SEC). Telegram has informed investors that at the moment it is trying to resolve the situation with the SEC restraining order. It is the major reason why the cryptocurrency might not be released on time.
Telegram also plans to launch Grams Wallet (a digital wallet), which will be available to approximately 200-300M app users around the world. According to published information, the company will integrate the wallet into Messenger, and will also make it available as an independent product. At the same time, the user agreement emphasizes that Telegram does not control the processing and confirmation of transactions on the TON platform.
The company has also clarified that it does not control either the amount or the type of fees for operations carried out in TON. Telegram FZ-LLC, a London-based division of Telegram, acts as the wallet provider and official developer of the Android application.
The user agreement also states that Telegram will not store any personal data of its users, public, and private keys. Thus, if a client loses access to their accounts, the company will not be able to restore them.
On September 20, the US cryptocurrency exchange Coinbase announced a list of 16 cryptocurrencies that may be included in its listing. In particular, Gram was one of these candidates. As the media emphasized, the digital currency exchange platform will consider completely new assets that have not yet been presented on other platforms for the first time.
The prospective of Gram
Pros and cons of a potentially large audience. It is not a secret that a huge Telegram user base is one of the major advantages of Gram over other cryptocurrencies. Moreover, Telegram got more than 110,000 new users due to protests in Hong Kong, and the privacy and security options available in Messenger were the main reason for that.
However, the project may encounter a transaction processing problem due to the large audience. In particular, TON will have to process a lot more operations than the Visa payment system in order to provide millions (if not billions) of its users with a convenient and fast service.
The problems with regulators. On October 11, the SEC announced the suspension of Telegram’s unregistered ICO in the amount of $1.7B. The defendants are Telegram Group Inc. and its subsidiary TON Issuer Inc. allegedly violated the law, because they did not register the sale of cryptocurrency. According to the SEC press release, 171 buyers from around the world purchased about 2.9B tokens, including 39 American citizens, who purchased more than 1B tokens.
What do we know about Libra?
Facebook defines Libra as “a simple global currency and financial infrastructure.” In other words, it is a digital asset that is supposed to use blockchain technology for transactions.
Libra will be pegged to fiat money, so it can be called stablecoin. It would make it less volatile, and it is supposed to be one of the distinguishing features (compared to other cryptocurrencies). At the end of September, the social network released a list of currencies that will stand behind Libra: US dollar – 50%, euro – 18%, yen – 14%, pound sterling – 11%, and Singapore dollar – 7%.
A group of companies called Libra Association will be in charge of the new currency. According to Facebook, it is an independent non-profit organization headquartered in Switzerland. It is intended to confirm transactions on the blockchain, manage the reserve (to which Libra is pegged), and channel funds to social needs. The social network has also created a subsidiary company Calibra, which will ensure the separation of financial and social data, as well as it will be in charge of the operational part of the cryptocurrency. A digital wallet will be created on the basis of Libra, and it will allow users to pay for online purchases with Libra tokens.
The Libra Association will be managed by a board of directors, and it will include representatives of the parental companies, which have contributed at least $10M. As of June 18, 28 companies were on the list. However, several large participants left the project after numerous problems with regulators, including eBay, Stripe, Mercado Pago, Visa, and MasterCard. Today, the Libra Association has around 21 members, including Uber, Lyft, Spotify, Vodafone, and Andreessen Horowitz (but the situation is still volatile). At the same time, according to the project roadmap, the cryptocurrency will be launched as soon as the company attracts 100 investors.
In July 2019, US Secretary of the Treasury Secretary Steven Mnuchin said that the U.S. administration was very concerned about the possible use of Libra by scammers (in particular, for money laundering and the financing of terrorist organizations).
Later Vodafone, one of Facebook’s partners in the Libra project, came up with the idea to appoint the CEO of the cryptocurrency project, but it must be a person who is not related to the social network anyhow. As it turned out, in August, Simon Morris (the head of Libra Association) left office. Currently, Bertrand Perez (formerly, senior director in PayPal) is acting CEO.
The prospects of Libra
Experts and regulators have repeatedly voiced problems related to Libra: from security problems (due to violations of privacy rules by Facebook) to the crisis of the banking system.
In particular, French Minister of Economy and Finance Bruno Le Maire criticized Libra for the possible undermining of the “monetary sovereignty” of countries. In response to these statements, Calibra CEO David Marcus said that the digital currency is intended to become the best payment system, which uses national currencies and provides significant value to consumers all around the globe.
Nobel Memorial Prize laureate in Economics Joseph Stiglitz said “every currency is based on trust, but only a fool would trust Facebook’s Libra”, and also added that probably this was the whole essence of the Libra currency. By saying that, he implies that social media already has great power, and has access to data of no less than 2,4B active users.
On October 23, Facebook CEO Mark Zuckerberg, speaking to the United States House Committee on Financial Services, admitted that he wasn’t sure whether the Libra digital currency would be launched. According to him, the company is not going to release the cryptocurrency until all the problems related to its regulation are resolved.
Semen Kaploushenko, CEO of KUNA Exchange, which is the first public cryptocurrency exchange in Ukraine and CIS.
Do you consider Libra (Facebook) and Gram (Telegram) promising projects?
This could be the first time when large IT companies release their own cryptocurrencies. And this situation has not gone unnoticed, since lawyers and regulators around the world actively participate in the process. In general, I believe that every large corporation will have its own tokens sooner or later, at least for use in its ecosystem (possibly to pay for its products).
Is the criticism of both projects by the regulators justified somehow, or it is all about authorities’ fear of an alternative currency, which can’t be controlled?
Essentially, this is an alternative banking system we are talking about. With regard to TON, it seems to be like an alternative internet. Obviously, governments are wary of things that cannot be controlled (especially in the long run).
Some experts believe that Telegram can solve the problems with regulations if Gram is pegged to gold bitcoin. What are your views on the subject? Can stablecoin become a winning strategy for the company?
Providing Gram with some tangible or intangible assets is not that easy. Most likely, supply and demand will form the price, like everything in this world. After all, neither the dollar nor Bitcoin is inherently backed by anything. The stablecoin strategy makes sense if we are talking about becoming a world/international currency, but this is not beneficial for both economy and states. Anyway, this is a new economic paradigm.
Which currency (Libra or Gram) you would invest in?
Frankly speaking, I wouldn’t invest in either of two currencies. These are private cryptocurrencies, which would have some issues with regulation, and probably face a fight with conservative banks.