Introduction
Last year saw a significant development in the relationship between the cryptocurrency industry and regulatory bodies and financial markets. U.S. authorities pursued key players, and major financial firms took steps towards accepting cryptocurrencies, if not fully adopting them.
BlackRock Files for Bitcoin ETF
The price of Bitcoin has recovered significantly from the lows it hit in late 2022, and renewed interest in cryptocurrencies is attributed to the potential approval of a Bitcoin exchange-traded fund (ETF) by the beginning of next year. While there are already futures-based Bitcoin ETFs, numerous applications for ETFs backed by actual Bitcoin have been rejected in the past. BlackRock’s entry into the realm of actual Bitcoin-backed ETFs changed everything in June.
BlackRock’s application for a Bitcoin ETF is seen as a significant step forward in the crypto space. The company is one of the largest asset management firms in the world and could lend greater credibility to the cryptocurrency market. Once BlackRock entered the competition, other industry giants like Fidelity began renewed efforts to launch their own Bitcoin ETFs.
Approval of an actual Bitcoin-backed ETF would be a pivotal moment for cryptocurrencies in terms of regulation and trust. Experts estimate that an actual Bitcoin-backed ETF could bring tens of billions of dollars in new funds into the Bitcoin market within a few years. Currently, the Securities and Exchange Commission (SEC) has until January 10 to decide on the ARK 21Shares Bitcoin ETF application from Ark Invest.
Sam Bankman-Fried Convicted of Fraud
Last year, the former CEO of the cryptocurrency trading platform FTX, Sam Bankman-Fried, was viewed by his supporters as a genius in the crypto industry and possibly the world’s first trillionaire. Now, he awaits sentencing after being convicted of fraud and conspiracy for his role in misusing customer funds on his platform.
Despite FTX’s intention to return 90% of recovered assets to customers, deposits will not regain their actual value at the time of the platform’s bankruptcy. This is because not all assets will be recovered, and those depositors missed out on the current rise in cryptocurrencies.
The entire FTX saga serves as a reminder that many benefits of cryptocurrencies are lost when users do not control their private keys. Whether cryptocurrency users will take private key custody more seriously in the future remains to be seen.
Justice Department Sues Binance and ‘CZ’
Recently, members of Congress have regained interest in preventing the use of cryptocurrencies in financial crimes. This concern was highlighted by the recent charges brought by the U.S. Department of Justice (DOJ) against Binance Holdings Ltd., the world’s largest cryptocurrency exchange. In November, Binance and its founder Changpeng Zhao, known as “CZ”, admitted to money-laundering charges and agreed to pay $4.3 billion in fines and settlements.
Treasury Secretary Janet Yellen stated that the platform allowed “illicit actors to operate freely, supporting activities from child sexual abuse to illegal drugs and terrorism, across more than 100,000 transactions.”
Binance’s admissions are seen as further evidence that the wild west days of cryptocurrency may be nearing an end. Investors may now want to consider other areas where further compliance with anti-money laundering regulations can be implemented, such as stablecoins.
Guidance
Accusations Against Coinbase, Kraken, and Binance by SEC
Binance was sued by the SEC in June for operating an unregistered securities exchange, as well as Coinbase in June too, and Kraken in November.
The action against Coinbase was particularly noteworthy, as the company had often touted its willingness to work with U.S. regulators and comply with the rules. Regardless of Coinbase’s intentions, the reality is that the exchange listed assets that the SEC deems to be securities.
At the heart of the matter is a disagreement over what constitutes a security and who has the authority to make that determination. Coinbase CEO Brian Armstrong stated in April that he would consider relocating the exchange if Congress and regulators did not provide further clarity on cryptocurrency regulations in the coming years. Even federal officials, such as Commodity Futures Trading Commission Chair Rostin Behnam, have said that the U.S. regulatory framework needs clarification.
The industry will continue to seek greater clarity in 2024 regarding which cryptocurrencies are considered securities and which are classified as commodities. In the meantime, the SEC is likely to continue operating under its chair Gary Gensler’s belief that “everything except Bitcoin” falls within its jurisdiction.
Source: https://www.investopedia.com/what-were-the-4-biggest-crypto-stories-of-2023-8413898
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