(Aug 26): A digital asset from a blockchain project linked to Telegram Messenger LLP has lost about US$2.7 billion (RM11.7 billion) in market value, reflecting the uncertainty sparked by the detention of the messaging app’s co-founder.

Toncoin, the token of The Open Network, slid more than 20% after Pavel Durov was reportedly taken into custody at a Paris airport on Saturday on suspicion of failing to take steps to prevent criminal use of Telegram.

The 10th largest cryptoasset pared some of the drop to trade at US$5.67 as of 7:25am Monday in London but is still down over 16% as a result of the drama involving 39-year-old Durov, according to data complied by Bloomberg.

The Open Network — or TON — blockchain has access to Telegram’s 900 million monthly users via a partnership and seeks to enable services such as in-app payments and games. TON’s rise spurred speculation that Telegram has a shot at becoming a “super-app” in the style of Chinese giants like WeChat.

Venture backing

The three-year-old foundation behind the project says it’s separate from Telegram. But the ties between Telegram and TON turned the latter into one of crypto’s most-hyped initiatives. Pantera Capital Management LP in May described a purchase of Toncoin as the firm’s largest-ever investment.

Billionaire Durov is also Telegram’s chief executive officer. The Dubai-based company issued a statement saying it abides by European laws, including the Digital Services Act, and that Durov has “nothing to hide.”

It’s “too early to tell” what impact Durov’s detention will have on Telegram longer term, said Richard Galvin, co-founder of hedge fund DACM, which purchased TON tokens in a private round in early 2023. The weekend market reaction “factored this uncertainty into the TON price” for now, he added.

Galvin said the key appeal of the TON-Telegram relationship “is the ability to introduce Telegram’s vast user base to crypto functionality,” and that “anything that weakens the competitive position of Telegram is negative for TON.”

Free-speech debate

Governments have faulted Telegram’s relatively light-touch approach to content moderation for encouraging criminality, while free-speech proponents praise the platform as a venue for open discussion. Telegram is popular with the crypto community, for instance for sharing investment tips.

“While there are some communities who utilise Discord, Signal and X for group communications, the crypto ecosystem does have a disproportionate dependency on Telegram,” said Stephany Zoo, head of ecosystem at market maker Caladan. “If Telegram is affected, there will be reverberating consequences.”

TON on its X social-media account joined the likes of Elon Musk in expressing backing for Durov, reposting the hashtags #FreePavel and #FREEDUROV and changing its logo to the “Resistance Dog” in a further show of support.

The value of assets locked on the TON blockchain surged this year to a peak of US$1.1 billion last month but the figure has now retreated to US$667 million, data from DefiLlama show. Toncoin’s price more than tripled in the past year and the token has a current market value of about US$14.4 billion, according to CoinGecko.