Although these cryptographic ideals may be precious, law enforcement agencies seem to be intentionally drawing a line, prioritizing the crackdown on organized crime over the so-called spirit of the encryption industry.

Author: Liam Kelly

Translation: Mary Liu, BitpushNews

Cryptocurrency developers really need to be careful - they are likely to bear legal responsibility for the use of their products by others.

Privacy experts say this is the worst-case scenario for billionaire and Telegram CEO Pavel Durov, who was sued by France this week.

Regulators are trying to hold Durov accountable for illegal activities on the Telegram platform, shining a spotlight on developers' responsibility for how their products are used.

Taylor Monahan, Chief Security Researcher at cryptocurrency wallet provider MetaMask, told DL News: "In my opinion, the situation with Telegram and Tornado Cash is a double blow."

"This is scary because it requires developers to take responsibility, to anticipate and understand everything users do, and then stop them from doing so."

High Stakes

Telegram denies the French authorities' charges against Durov and states that it complies with EU law.

The risks involved in this case are enormous, especially for the cryptocurrency industry.

Based in Dubai, Telegram has 950 million users globally and has become an indispensable part of the digital asset ecosystem by providing a channel for collaboration and communication for millions of people and businesses.

Smart contracts cannot save them. From the beginning, the company has claimed that its "don't ask, don't tell" approach to user activity is a key feature of its business model.

The boundary between the end of technical product development and the beginning of legal responsibility has been blurry for years.

Earlier in March, a Dutch court convicted former developer of the cryptocurrency mixer Tornado Cash, Alexey Pertsev, of money laundering amounting to $2.2 billion, and he was subsequently sentenced to five years in prison.

Even though Pertsev himself did not directly launder money, it did not matter, as long as he managed a website that facilitated such activities.

Now, 39-year-old Durov, who holds dual French and Emirati citizenship, faces a similar predicament.

A French court on Wednesday charged Durov with failing to prevent criminals from using the popular social media platform to commit various crimes, including child sexual abuse, drug trafficking, and fraud.

According to the French prosecutor's statement, Telegram refused to cooperate with French law enforcement in investigating these criminal activities and refused to provide information.

Freedom of Speech

Supporters of Telegram, including Elon Musk, have characterized this case as an attack on freedom of speech. After all, Telegram's business model is built on the idea that the platform is an uncensored marketplace of ideas, for better or for worse.

But this idea conflicts with long-standing legal principles that prioritize cooperation with law enforcement over business models, product design, or technical features such as smart contracts.

In this regard, Gary Gensler certainly knows how to provoke the industry.

Moreover, in terms of business models, Tornado Cash may actually be in a more favorable position, as it is decentralized and still operational. In contrast, Telegram is primarily controlled by Durov, closer to traditional models like WhatsApp.

Harry Halpin, CEO of blockchain privacy company Nym Technologies, told DL News: "WhatsApp and Telegram are both centralized on a set of servers, with the company responsible for these servers having absolute control."

This makes it easier for management to review illegal or offensive content and to close or review accounts.

"Difficult to Detect"

Halpin stated that because WhatsApp and Telegram are not open source, meaning their code is not publicly visible, governments may monitor users. He said, "This is difficult to detect."

Although the fear of state surveillance has long fueled crypto culture, prosecutors seem to have finally drawn a red line.

In Pertsev's trial, a Dutch judge condemned the developer for not responding to requests from authorities for information or action regarding the mixer's illegal activities.

Taylor Monahan, Chief Security Researcher at MetaMask, told DL News: "This is scary, akin to the government requiring every developer to become a highly scrutinized Web2 company from day one."

Cryptographic Channels

For an industry that prides itself on decentralization, Telegram's role is crucial. Over-the-counter trading markets, such as offx and SecondLane, are directly built into Telegram.

The dissemination and marketing of emerging projects heavily rely on TG groups to reach audiences, and the messaging app integrated a cryptocurrency wallet and in-app encrypted payments this year.

Reuben Yap, administrator of the privacy project Firo, told DL News: "Telegram is no longer just a messaging platform."

As the case progresses, the fate and market position of Telegram may undergo a transformation.

Monahan stated that this case has already caused significant damage, saying, "This is a very bad thing and will cause immeasurable harm to individual freedom and privacy."

Although these cryptographic ideals may be precious, law enforcement agencies seem to be intentionally drawing a line, prioritizing the crackdown on organized crime over the so-called spirit of the encryption industry.

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