The Crypto Roundup: 27 August 2024

On August 26, the Paris Public Prosecutor’s Office explained why Pavel Durov, the founder and CEO of Telegram, was arrested and detained. Durov was taken into custody on August 24 at Le Bourget airport near Paris at 6 p.m. UTC. This arrest has started a major legal investigation by the cybercrime division of the Prosecutor’s Office, known as JUNALCO, and accuses Durov of being involved in various criminal activities, focusing on his alleged role in using Telegram to facilitate illegal transactions.

According to their press release, the charges brought against Durov include complicity in operating an online platform that enables organized crime. Additionally, he is accused of obstructing justice by refusing to provide critical information required for lawful surveillance. The press release also highlights Durov’s alleged involvement in distributing illegal materials, participating in the narcotics trade, and offering tools that grant unauthorized access to data processing systems.

The case is being handled by investigative magistrates from the Paris Public Prosecutor’s Office, in collaboration with specialized units such as the Centre for the Fight against Cybercrime (C3N) and the Anti-Fraud National Office (ONAF). The seriousness of the allegations has led to Durov’s police custody being extended, with a potential duration of up to 96 hours.

The investigation also goes into complex cryptography-related offenses, with Durov accused of providing encryption services without the necessary official declarations and importing cryptographic tools that bypass legal requirements. French President Emmanuel Macron has addressed the situation on X, stressing the independence of the judiciary and affirming that Durov’s arrest is part of an ongoing legal process and not a political action.

Cryptocurrency Toncoin ($TON), which is closely connected to the Telegram messaging platform through The Open Network (TON) — a blockchain project originally developed by Telegram — is down around 21% since the news of Durov’s arrest got out.

According to a Bloomberg report, Russia is preparing to begin trials that involve the use of cryptocurrency exchanges and digital tokens for cross-border transactions, aiming to mitigate payment difficulties exacerbated by international sanctions. The trials are scheduled to start on September 1, as reported by sources familiar with the matter.

The trials will utilize the National Payment Card System, a network established by Russia’s central bank in 2014. This system, which currently supports Mir cards and instant interbank payment services, was chosen for its robust infrastructure, making it capable of handling complex transactions like those involving cryptocurrency exchanges. The system is fully regulated by the central bank, ensuring compliance with existing financial regulations during the testing phase.

This follows recent developments that saw Russian lawmakers approve a bill that would permit businesses to use cryptocurrencies for international trade on July 30. This was part of a package that included regulations for cryptocurrency mining and the circulation of other digital assets while maintaining the current ban on cryptocurrency payments within Russia. These regulations became effective on August 8 after President Putin signed the bill.

The move towards crypto trials is a response to the growing difficulties Russian businesses face in conducting international transactions, challenges that have been intensified by recent U.S. sanctions that expanded restrictions on foreign banks dealing with Russia. This marks a significant shift from January 2022, when the central bank proposed a blanket ban on cryptocurrencies. The government is now actively exploring ways to legalize crypto exchanges, although a definitive solution has yet to be finalized.