Telegram has become the go-to app for heroin, guns, and everything illegal. Can crypto save it?

This is not a South American drug market or even an obscure dark web marketplace. It’s Telegram, one of the world’s top five most downloaded apps and the go-to communications platform for everyone from activists to cryptocurrency enthusiasts. A recent tour by Fortune of Telegram channels that operate like stores revealed that it’s quick and easy to find everything from jars of heroin to stolen stimulus checks to AK-47 machine guns.

Telegram’s end-to-end encryption means that no third party can access user data. But as a result, it’s failed to build an ad-based economy and regulate content. So to keep the lights on without selling user data or enduring the regulatory oversight required by going public, the app has launched its own blockchain, TON (The Open Network), and native token Toncoin.

If successful, Telegram could become a “super app” without needing to clean up its act. But the implications of this run deeper than bringing the dark net to the masses: Extremists and criminals running popular channels could earn crypto for their content.

“Creating a Telegram is easier to create than a Facebook account,” says David Maimon, a professor of criminal justice and criminology at Georgia State University who’s been monitoring thousands of illicit groups and channels on Telegram since 2019. For criminals, “Telegram now is the place to go.”

The dark net in your pocket

Telegram’s philosophy is rooted in its political origins. CEO Pavel Durov created Russia’s most popular social media network, VKontakte. In 2014, he was forced to flee after refusing to share the data of its Ukrainian users with the government. Prior to his expulsion, he’d developed Telegram to communicate with his brother, and now CTO, Nikolai, out of fear of government spying.

With over 900 million active monthly users, Telegram has almost doubled in size since 2021—and aims to reach 1.5 billion by 2030. Headquartered in Dubai, it has “disclosed 0 bytes of user data to third parties, including governments.” As a result, it’s hard to regulate and monetize, spawning a boom in illicit channels. (Fortune sent messages to Telegram’s PR channel seeking additional comment but received no response.)

The dark net itself is slow, requires the Tor browser, and its complex URLs often change. Telegram can be easily found in the App Store. And if someone can imagine something they want, Telegram almost certainly has it. LSD and OxyContin. Cloned credit cards. Stimulus checks. Winding paragraphs of stolen identities, with victims reduced to names, birth dates, Social Security numbers, emails, passwords, home addresses, and card numbers. Typing loosely related jargon into the app’s search engine produces dozens of channels, many with tens of thousands of members competing to offer you the best deal.

Channels feature drop-down menus, shopping carts, wish lists, and reviews. One “exclusively for members in the carding industry” offers free tutorials on how to commit fraud, before customers graduate to buying CVV codes and card clones. “Our hundreds of satisfied customers will attest to the fact that we only offer the highest caliber of supplies for your project. We appreciate your business!” the admin writes in a broadcast to over 50,000 members. In the more banal corners, discounted gift cards, flights, and hotel stays are exchanging hands. “It’s really crazy what’s going on. The spectrum is really wide,” says Maimon.

Thus attracting big advertising dollars has proved 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 ad platform in 2021. Advertisers can post text messages of 160 characters or fewer in channels with at least 1,000 subscribers. Telegram channels generate 1 trillion views monthly, but only 10% of these are monetized with ads, Durov said in February.

Turning to crypto

An alternative option for Telegram to spin up some money is crypto, which promises the “highest potential to keep its control and monetize,” says Jiang of Pantera, which has invested in Telegram’s own blockchain, TON. The funding is Pantera’s “largest investment ever,” and earlier this month, the firm revealed it’s adding to its initial sum, according to a letter shared with investors and viewed by Fortune.

Launched in 2018, TON was abandoned in 2020 following a court battle with the Securities and Exchange Commission. But now, amid a more favorable regulatory environment and improved market conditions, the company is running headfirst toward crypto in a desperate bid to monetize without bowing to the authorities.

TON, notes Jiang, is Telegram’s “largest liquid asset on their balance sheet.” It accrues staking rewards from transaction fees and protocol issuance. In addition, there are “commercial agreements” whereby it earns more TON over time based on certain performance criteria, Jiang adds.

Telegram in September launched a self-custodial TON wallet that allows users to send USDT, its native Toncoin, and Bitcoin to other users. The majority of illicit payments are made off-app via crypto, says Maimon, although he’s seen “some mentions” of payments via the TON wallet beginning to pop up on Russian-operated channels. But with the wallet still in its infancy, TON transfers for illicit goods could become more mainstream.

Building on this momentum, Telegram in March announced that channel owners would start to receive 50% of any revenue generated by ads in their channels, with all payments settled on TON. It also revealed its Mini Apps feature, which allows users to build apps within Telegram, in a bid to become increasingly like the super app WeChat, which boasts over 1.3 billion mostly Chinese users.

While recently scrolling through some of the illicit channels, the only ads to appear were links to rival shops. So, at least for now, criminals running shops and extremists broadcasting propaganda will be paid in Toncoin for ads on their channels.

So far, Telegram’s crypto-focused gambit is working. Toncoin has nearly tripled since March, trading near $7, according to CoinGecko data. The same month of the revenue-sharing announcement, Durov revealed the company is “nearing profitability.”

“If TON really does take off, then they never have to go public,” says Jiang. In a channel dedicated to stolen stimulus checks, a vendor quotes Lil Wayne: “Scared money makes no money.” In another, a shop for stolen bank details that broadcasts to over 27,000 subscribers, are the words: “Put food on the table.”