Bitcoin prices are skyrocketing again. Major financial companies are showing renewed interest in digital currencies. And crypto enthusiasts are celebrating the end of a long period of price stagnation and bankruptcy.
However, the sudden burst of optimism comes at a turbulent moment for the cryptocurrency industry.
The last time crypto prices were soaring, the industry's most influential executives were rival billionaires Sam Bankman Freed and Chao Changpeng, who could move the market through online sparring. was. Currently, Bankman Fried, the founder of the cryptocurrency exchange FTX, and Chao, who ran the world's largest cryptocurrency company Binance, are facing prison terms due to their simultaneous ouster.
A federal jury last month convicted Bankman Fried of fraud and conspiracy charges stemming from the FTX collapse. Three weeks later, Chao pleaded guilty to money laundering charges and agreed to give up control of Binance.
Their disappearance from a crowded field of crypto entrepreneurs has left Wall Street executives and government regulators scrambling to control the industry's next chapter. Their jockeying for influence could determine whether cryptocurrencies survive in the United States, where regulatory crackdowns have made it increasingly difficult for the industry to operate.
Some executives say the crypto industry needs to purge figures like Chao and Bankman Fried, aggressive entrepreneurs who prioritized growth over compliance, to gain support from regulators and the public. argues that it is necessary to do so.
Following Zhao's guilty plea, Brian Armstrong, CEO of U.S.-based cryptocurrency exchange Coinbase, hailed the case as a turning point for the industry.
“We now have the opportunity to begin a new chapter,” Armstrong said. Posted on social media last month. “This industry should be built here in the United States in a manner that complies with American law.”
However, the cryptocurrency world is still filled with companies engaging in risky business practices and not offering much transparency about their experimental products.
“They have no intrinsic value,” said Hilary Allen, a financial regulation expert at American University. “The only hope is that more money will be thrown around and more people will buy into it to create demand.”
Cryptocurrencies always have influential leaders. The vision behind Bitcoin, the original and most valuable digital currency, was first laid out by someone using the pseudonym Satoshi Nakamoto. Its enigmatic identity has become a brand in itself.
As the world of cryptocurrencies has expanded, new centers of power and influence have emerged. Chao founded Binance in 2017 and built the world's largest marketplace for buying and selling experimental coins. The scale and reach of the exchange has made Zhao a Twitter star, now known as Rejected.
Mr. Zhao's main rival was Mr. Bankman Fried, who graced billboards and magazine covers and developed a persona as a responsible adult who helped emerging industries cooperate with regulators.
In the end, both Mr. Zhao and Mr. Bankman Freed were ousted. Bankman Fried is scheduled to be sentenced in March, and he could face decades in prison. Mr. Cho's sentence is likely to be lighter, with prosecutors expected to seek a sentence of approximately 18 months in prison.
“It's a really good thing that these characters are not part of the plot,” said Jeremy Allaire, chief executive officer of cryptocurrency company Circle. “I’ve been focused on how I can use this to help the world.”
A new generation of executives is already emerging as the industry's top cheerleaders. Paolo Ardoino, an outspoken cryptocurrency enthusiast with a large following online, recently became CEO of Tether, the company that manages one of the most popular digital currencies. At Binance, Mr. Zhao was replaced by Richard Teng, a key executive at the exchange who was groomed to be Mr. Zhao's successor.
In theory, Mr. Teng is the exact opposite of Mr. Zhao. Binance's founder has been hostile to regulators, but Teng is a veteran of the country's central bank, the Monetary Authority of Singapore.
The future of Binance is uncertain. As part of last month's settlement, the company agreed to pay a $4.5 billion fine to multiple government agencies and to install American-made monitors in its companies for the next three years.
“My general sense is that we really need to 'wait and see,'” Allaire said. “I don't think anyone knows the details of what that surveillance means.”
A Binance spokesperson did not respond to a request for comment.
Perhaps the biggest beneficiary of crypto's current restructuring is Coinbase's Armstrong. declared This month, he said Bitcoin “could be the key to expanding Western civilization.” Coinbase's stock has nearly tripled in the past six months, even after the Securities and Exchange Commission filed charges against the company as part of a broader crackdown on the industry.
“Coinbase is now the last survivor,” said John Todaro, an analyst at Needham who tracks the crypto industry. “There’s less competition there.”
Coinbase also stands to benefit from a potentially dramatic development in the crypto world: the possible approval of an exchange-traded fund (ETF) to track the price of Bitcoin.
Bitcoin's price has soared to more than $43,000 in recent days, its highest level since a spate of bankruptcies plunged the industry into crisis last year. Much of this enthusiasm is fueled by growing confidence that the SEC is poised to approve Bitcoin ETFs traded on traditional stock exchanges, potentially leading to an influx of new capital into the industry. .
Coinbase has agreed to store the Bitcoin underlying an ETF offered by BlackRock, one of the world's largest asset managers. BlackRock is the latest of several large financial firms, including Fidelity, to apply to offer the investment product.
Wall Street was once the enemy of the insurgent crypto industry, but after a harrowing 18 months of bankruptcies and arrests, crypto advocates welcome Coinbase and BlackRock collaboration as possible salvation are doing.
“Cryptocurrency isn't disrupting Wall Street; it's merging with it,” said Ms. Allen, a professor at American University. “That's pretty clear. They think they can make some money here.”