The past year has been a year of recovery for the cryptocurrency market. The crypto market capitalization more than doubled in 12 months – it increased from $830 billion to the current $1.735 trillion. Quotes have been rising since the crash in 2022, and despite the latest rise, the industry has still not fully recovered from what happened, with many coins trading several times below historical highs.
The year 2023 began with a trend towards artificial intelligence. The ChatGPT chatbot caused a real sensation, including in the field of cryptocurrencies. Developers began using the application to write smart contracts on the Ethereum network, find errors in the code and test it. The popularity of AI has inevitably led to an increase in token prices, one way or another related to developments in the field of artificial intelligence. In particular, they reacted with jumps in rates to news about the ChatGPT developer, OpenAI. In early January, several coins, united by a common “narrative” around AI, rose in price by more than 50% in a week. Some tokens showed multiple growth in a short period of time. For example, the cost of the AGIX token quadrupled in just over a week. It began to rise in price on news of Microsoft’s plans to invest in OpenAI.
In March, the United States experienced the second-largest bank failure in the country’s history. US-based Silicon Valley Bank (SVB) has been one of the most prominent lenders in the technology startup industry. The bankrupt bank was valued at $40 billion back in 2022. Among the reasons for the collapse are too rapid growth after the pandemic, unpreparedness to tighten monetary policy by the US Federal Reserve, errors in capital management and difficulties in the technology sector on which the bank focused. It all started with the closure of a similar bank, Silvergate Bank, after which investors began to rapidly withdraw funds from SVB, as well as Signature Bank, Western Alliance and First Republic. At that time, there were fears that the banking crisis was only flaring up, but regulators managed to stabilize the situation. At the same time, against the backdrop of the collapse of the banking sector, the Bitcoin rate increased. From the beginning of March to mid-April, the cryptocurrency rose in price from $19.5 thousand to $31 thousand. Investors massively withdrew money from banks, part of the funds flowed into Bitcoin, which supported its rate.
Crypto companies in the United States do not always manage to comply with local regulations, which often results in multi-million (and in some cases, billions of dollars) fines and sometimes even leads to bankruptcy. For example, the Kraken exchange paid a fine of $30 million, the American division of Bittrex went bankrupt, and the LBRY project was closed due to multimillion-dollar debts resulting from a legal battle with the financial regulator. Against this background, the Ripple case looks amazing. In 2020, the SEC accused the company of selling unregistered securities under the guise of the XRP token for $1.3 billion; the litigation lasted several years and in the summer of 2023 the court ruled in favor of Ripple. The judge found that sales and other distributions of XRP did not constitute the offering and implementation of investment contracts. At the same time, the purchase of coins worth over $700 million was still considered illegal under American law. The proceedings continued, and the SEC promised to challenge the losing part of the decision. Later, in October, the regulator was forced to withdraw some of its claims. Namely, civil lawsuits against Ripple CEO Brad Garlinghouse and co-founder Chris Larsen. However, the trial itself continues. Now it remains to be seen what fine Ripple must pay for selling its tokens to large investors, and the SEC has the right to appeal this decision if it does not suit the Commission.
Unlike the proceedings with Ripple, in the Binance case everything developed according to a much more rapid and negative scenario for the exchange. In early June, the SEC filed a lawsuit against the largest trading platform and its head, Changpeng Zhao, for violating securities trading rules. The Commission recognized the BNB token and the BUSD stablecoin as securities. In total, Binance Holdings Ltd., its US subsidiary BAM Trading Services Inc. (BAM Trading) and their co-founder Changpeng Zhao were charged with 13 charges. These included operating unregistered exchanges, misrepresenting the control and supervision of Binance.US (a separate US division of the exchange), and engaging in unregistered offerings and sales of securities. The SEC alleged that Binance and Zhao allowed large American clients to trade on the Binance.com platform, although they were technically prohibited from accessing the “global” Binance. The SEC also accused Zhao and Binance of diverting client assets, including to Zhao’s companies Sigma Chain and Merit Peak.
At the same time, the regulator decided to equate a number of other tokens that are not related to Binance to securities: Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Cosmos (ATOM), Sandbox (SAND), Decentraland (MANA) ), Algorand (ALGO), Axie Infinity (AXS) and COTI (COTI).
At the same time, the US Department of Justice was conducting an investigation against the crypto exchange. According to the department, Binance has become a leader in the crypto market, including due to the crimes committed. As a result of the pre-trial settlement, Zhao resigned from his position, pleaded guilty to violating the Bank Secrecy Act and was released on bail of $175 million (with a ban on leaving the United States until the end of the trial. The exchange agreed to a deal in which Zhao would pay a fine of $50 million and will retain a majority stake, but will not be able to hold management positions or make public statements on behalf of the exchange, and the company will pay several fines totaling $4.3 billion. Among other things, the 30-page indictment against Binance states that the exchange does not comply with measures to combat the financing of terrorism and drug trafficking, and also violates US sanctions, including serving clients from the Crimea, DPR and LPR.Criminal charges against the site include introducing an unlicensed financial business, conspiracy and violating the Emergency Financial Powers Act.
The first application for a spot Bitcoin ETF was submitted back in 2014 by the famous Winklevoss brothers, but at that time the market was not yet ready for such large-scale changes. Then and subsequently, the SEC refused to consider such applications because the cryptocurrency was traded on unregulated exchanges. It was impossible to provide assurances to investors that the market was free from fraud and manipulation. However, everything changed last summer. In June, one of the largest investment firms in the world, BlackRock (with $9 trillion in assets under management), submitted its application through its iShares division. Since then, other companies such as Invesco, WisdomTree, Bitwise, Ark Investment Management and Valkyrie have re-submitted applications to register their own Bitcoin spot ETFs, but made significant changes to them. From that moment on, the SEC stopped rejecting issuers outright, but began an active dialogue with them, which resulted in constant revision of applications. In particular, BlackRock made the last change at the end of December. And rumors have appeared on the market that the regulator may approve several applications from various companies at once in the first half of January. At the moment, the possible approval of a spot Bitcoin ETF is called one of the key factors in the growth of the cryptocurrency market, along with the upcoming halving. It is expected that if a new instrument appears, the largest institutional investors will have a legal way to enter the cryptocurrency market. In this case, they can provide significant support to the Bitcoin rate.
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