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Cryptocurrency re-surfaced with force in 2023, after a dismal two-year covid performance, reaching all-time high Bitcoin (BTC) prices of more than US$35,000.
Today, Bitcoin is trading at more than US$42,000 at a maximum supply of 21 million coins, and there are predictions it could surge to new heights in 2024.
But what happened this year to propel this industry?
The Market Herald has compiled a list of some of the biggest stories to headline the crypto industry in 2023, with expert commentary from Investment Analyst Matthew Harcourt from cryptocurrency investment company Apollo Crypto.
Mr Harcourt delves into the news headlines, trends and precedents that have set the trajectory for the industry as it heads into 2024.
Regulatory landscape
Crypto assets run on a technological platform known as a blockchain, enabling investors to confirm transactions without needing clearance from a central finance authority.
The platform itself is highly unregulated, however, this year there’s been heavy talk on how it can be regulated to increase financial security across the board.
In October this year, Australia saw some action with the Federal Government’s release of a proposal paper outlining recommendations to enhance the regulation of cryptocurrency exchanges.
“Going into 2024, the regulatory crackdown is likely to shift from centralised exchanges to decentralised exchanges…,” Mr Harcourt explained.
Centralised exchanges are controlled by one major entity, which means faster transactions and easier use. They act as intermediaries between buyers and sellers for higher liquidity.
Decentralised exchanges offer lower transaction fees and allow users to hold onto their crypto assets, meaning they can avoid some of the regulatory burdens already in place.
“…a little bit of worry is in the market about the SEC (Securities Exchange Commission) trying to apply the old rule of law to these completely new technologies and businesses to sort of better their interests – which is pretty much what they did with centralised exchanges throughout this year…,” Mr Harcourt said.
Mr Harcourt said the crypto industry was geared to experience continual regulatory clarity from leading jurisdictions like Hong Kong, Europe and parts of the Middle East in 2024.
“I suspect that the U.S. will continue to fight the industry and push innovation off-shore -as has been the trend for years,” he predicted.
Grayscale and the SEC
This year, the world’s largest crypto asset manager, Grayscale, took the US Securities Exchange Commission (SEC) to court over the rejection of its spot Bitcoin exchange-traded fund (ETF).
The legal dispute concluded with the SEC instructed to discard its initial rejection grounds. Grayscale emerged victorious, securing approval to launch the ETF.
The anticipated debut for the first-ever spot Bitcoin ETF is now slated for January 2024, marking the first substantial deadline for filing denial.
“Grayscale’s win in court shows that when the rule of law is fairly applied, the SEC will not be able to use its overwhelming power and resources in an unfair way,” Mr Harcourt said.
“Going forward, it shows that the SEC will need to operate more fairly with the crypto industry as they will not be able to bully the industry the same way when in court.”
Crypto crime crackdowns
The SEC has had its victories too.
This year, one of the wealthiest individuals to ever grace the crypto industry experienced his downfall. Sam Bankman-Fried was convicted on fraud charges concerning his FTX crypto exchange.
His empire crashed in November 2022 at a value of $40 billion, along with his Alameda Research trading firm, forcing Mr Bankman-Fried to file for bankruptcy.
Mr Bankman-Fried is serving a maximum sentence of 115 years in a US prison.
Within weeks of that decision, the founder of the world’s largest cryptocurrency exchange, Binance, Changpeng Zhao, was fined $50 million and stepped down as CEO after pleading guilty in a Washington District Court to violating US federal law.
Mr Zhao violated laws that require financial institutions to guard against money laundering and terrorist financing. He’s due to be sentenced early next year.
Binance as a company pleaded guilty to wilfully violating the Bank Secrecy Act, knowingly failing to register as a money transmitting business, and willfully violating the International Emergency Economic Powers Act.
The US Department of Justice alleged its platform accommodated criminals across the world who used Binance to move their stolen funds and other criminal proceeds.
“Binance enabled nearly $900 million in transactions between U.S. and Iranian users,” The Department of Justice Attorney General Merrick Garland reported.
“And it facilitated millions of dollars in transactions between U.S. users and users in Syria and the Russian-occupied Ukrainian regions of Crimea, Donetsk, and Luhansk.
“For example, between August 2017 and April 2022, there were direct transfers of approximately $106 million in bitcoin to Binance.com wallets from Hydra, Hydra was a popular Russian darknet marketplace, frequently utilised by criminals, that facilitated the sale of illegal goods and services.
“From February 2018 to May 2019, Binance processed more than $275 million in deposits and $273 million in withdrawals from Bestmixer. Bestmixer was one of the largest cryptocurrency anonymizing services in the world before it was shut down for money laundering.
“Binance also did more than just fail to comply with federal law – it pretended to comply.
“The message here should be clear: Using new technology to break the law does not make you a disruptor. It makes you a criminal.
“The Justice Department is requiring Binance to pay $4.3 billion in penalties and forfeiture.”
Sun charges hit celebrities, including Lindsay Lohan
Earlier, in March, the SEC announced charges against crypto asset entrepreneur Justin Sun and three of his companies, Tron Foundation, BitTorrent Foundation and Rainberry, for the unregistered offer and sale of crypto asset securities Tronix (TRX) and BitTorrent (BTT).
The SEC also charged Sun and his companies with fraudulently manipulating the secondary market for TRX through extensive wash trading, involving simultaneous, or near-simultaneous, buying and selling of a security, so it seems actively traded without an actual change in ownership. Interestingly it also laid charges around orchestrating a scheme to pay celebrities to tout TRX and BTT without disclosing their compensation.
The SEC simultaneously charged the following eight celebrities for illegally touting the securities without disclosing their compensation – those celebrities included Lindsay Lohan. She was ordered to repay the US$10,000 she was paid to promote Sun’s TRX and BTT to her 8.4 million Twitter, or X, followers, plus a US$30,000 penalty.
Recent reports suggest some platforms that Sun backed, including exchange HTX, had been hacked for well over US$100.
SEC keeping watch
When asked about his main concerns regarding crypto crime heading into 2024, Mr Harcourt said there were others in the industry that the SEC would be watching. For one, it has been trying to serve a lawsuit against Hex and PulseChain Founder Richard Heart.
2024 predictions
While Mr Harcourt said there was no way to know for certain if Bitcoin would edge even higher in 2024, the strong support for a Bitcoin ETF suggests the market is poised to see some positive action.
“…if the macro picture stays favourable…I do think you’re going to get strong price action in Bitcoin and then that will flow onto the crypto market more broadly,” he said.
Mr Harcourt emphasised that Bitcoin ETFs could be a catalyst for institutional adoption, as they boast easy, safe and accessible investment characteristics for large companies.
International crypto giant BlackRock also joined the ETF industry with an Ethereum fund under its iShares Ethereum Trust division. This was confirmed in early November through a listing on the NASDAQ.
“…at the moment, there’s there’s a lot of hurdles from these internal compliance perspectives and so an ETF that’s created by BlackRock, the largest asset manager in the world … there’s no lower barrier to entry into buying Bitcoin than that institution, essentially,” he continued.
Lastly, Mr Harcourt touched on the utilisation of blockchain technology, by banks through what’s known as tokenisation. Tokenisation is the blockchain digital representation of assets.
“Going forward you may start to see competition from other banks heating up in the tokenisation space, banks will also look to become crypto custodians,” he said.
