What an eventful year it has been for the crypto industry!
With 2023 coming to an end, the cryptocurrency space has had its share of battles and victories, all of which continue to shape an industry that, though still growing, has managed to make a mark in the global financial sector.
This year, regulators came down hard on key players in the market, one of the biggest and most influential CEOs pleaded guilty to a criminal charge, and the hype around a spot Bitcoin exchange-traded fund (ETF) intensified following applications from major financial institutions.
We now go further to explore some of the major events that made headlines in 2023.
Bank Collapses That Affected Crypto Companies
Silicon Valley Bank (SVB), Signature Bank, and Silvergate, which catered to crypto businesses and tech startups, fell apart within a week in March in what was described as one of the major collapses to rock the American banking sector.
It all started with Silvergate Bank, which revealed that it was struggling to stay in operation after reporting a $1 billion loss in the fourth quarter of 2022 following the collapse of the once-cryptocurrency exchange giant FTX. Days after, the financial institution announced the closure of its Silvergate Exchange Network (SEN) – an instant settlement service that allowed crypto clients to make payments 24/7 – stating that the move was a “risk-based decision.”
Silvergate eventually went into voluntary liquidation even though it was solvent. Amid the bank’s crisis at the time, crypto heavyweights, such as Huobi and Coinbase, cut ties with Silvergate. A few days later, the California Department of Financial Protection and Innovation closed down SVB, which mostly served the tech industry, becoming the largest bank in the United States to fail after Washington Mutual Bank in 2008.
SVB experienced a bank run after depositors made huge withdrawals. Furthermore, banking Regulators shut down the crypto-friendly Signature Bank, which saw panic from customers after SVB’s fall, resulting in major stock sell-offs and massive outflows.
The collapses, meanwhile, had a significant impact on crypto companies, with one of the biggest clients being Circle. The USDC stablecoin issuer revealed that it held part of its cash reserves in various US financial institutions, including SVB, Silvergate, and Signature banks, with over $3 billion in SVB.
The USDC temporarily depegged as a result of SVB’s failure. Other crypto companies that had exposure to SVB and Signature included Ripple, BlockFi, Coinbase, and Paxos.
The Inscriptions Craze
First started on the Bitcoin network, the inscription mania also found its way to Ethereum and Ethereum Virtual Machine (EVM) chains.
Inscriptions, simply put, are data files embedded on the blockchain. The fad started on the Bitcoin blockchain with Bitcoin Ordinals, which, similar to non-fungible tokens (NFTs), can be inscribed on a satoshi – the smallest denomination of Bitcoin (BTC).
The ordinals craze prompted a surge in transactions on the Bitcoin network. But the trend has also caused network congestion, along with high fees.
Meanwhile, inscriptions went beyond the Bitcoin network when developers found a way to deploy inscriptions on Ethereum and other blockchains beginning in November. Inscriptions on Ethereum and EMV-compatible chains are embedded in transaction call data.
According to data from Etherscan in December, a spike in transaction activity on EVM chains was majorly attributed to inscriptions.
However, Bitcoin Ordinals, especially, have not been without criticism, with maximalists labeling the trend as spam and a scam. Bitcoin Core developer Luke Dashjr stated that Ordinals creators were exploiting a vulnerability in Bitcoin Core to spam the blockchain. The developer also believes that ordinals are an attack on Bitcoin.
Binance and Coinbase Slammed With SEC Lawsuit
In June, the US Securities and Exchange Commission (SEC) went after two of the biggest cryptocurrency exchanges – Binance and Coinbase. According to the regulator, in its lawsuits against both companies, which were each filed within 24 hours, both firms violated securities laws and offered assets for trading deemed as securities.
However, Binance and Coinbase denied the SEC’s claims, with both exchanges seeking to dismiss the regulator’s lawsuits. Binance.US, the American affiliate of the international exchange Binance, trimmed down its workforce as the company anticipated a long and expensive legal battle with the SEC.
Ripple’s Victories Against the SEC
A month after the SEC’s lawsuit against Binance and Coinbase, another crypto company, which has been involved in a lengthy legal fight with the regulator, scored a major win in July.
In December 2020, the SEC sued Ripple Labs, the company behind the XRP token, for conducting a $1.3 billion unregistered securities offering through its sale of XRP. Ripple and its CEO, Brad Garlinghouse, fought back against the allegation, maintaining that the firm did not commit any crime.
A partial victory came for Ripple in July 2023 after Judge Analisa Torres ruled that XRP sales on public crypto exchanges did not violate securities laws. However, Judge Torres stated that the sale of XRP directly to sophisticated investors violated securities laws.
Ripple scored another win in October after Judge Torress dismissed the SEC’s appeal against the judge’s decision in July. A third victory came for the company in the same month after the securities watchdog dropped its charges against Ripple’s top executives — Brad Garlinghouse and Chris Larsen.
BlackRock’s Spot Bitcoin ETF Filing
BlackRock, the world’s largest asset manager with nearly $10 trillion in assets, made headlines in June after the company filed for a spot Bitcoin exchange-traded fund (ETF) with the SEC. Following BlackRock’s filing, other companies such as Fidelity Digital, WisdomTree, Invesco, and VanEck resubmitted their applications.
The SEC has yet to approve any spot Bitcoin ETF in the United States, with the regulator only favoring Bitcoin futures ETFs. However, there have been renewed hopes of a possible spot BTC ETF, with reports stating that discussions between potential issuers and the SEC have reached an advanced stage.
Meanwhile, ETF applicants, investors, and the broader crypto community have set their sights on deadlines between Jan. 5th and 10th, 2024 deadline, with the hope the US will finally have a spot Bitcoin ETF product after years of delays and rejections.
Worldcoin: The Crypto Iris-Scanning Project
Worldcoin, co-founded by OpenAI CEO Sam Altman, launched its WLD token in July 2023. However, the project has faced criticisms for its iris-scanning feature, which users will undergo to get WLD tokens.
Regulatory authorities in France, the United Kingdom, Germany, and Argentina raised privacy concerns and initiated investigations into the project. Kenya, on the other hand, suspended Worldcoin activities in the country.
Amid regulatory scrutiny, recent reports stated that Worldcoin quietly discontinued its orb verification for offline users in India, Brazil, and France. Meanwhile, the project expanded into Singapore, allowing users to “verify their unique humanness at an Orb.”
Grayscale’s Win Against the SEC
After its defeat to Ripple, the SEC suffered another loss in a legal case involving asset management firm Grayscale. The latter sued the Commission for rejecting its request to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.
In August, a United States court instructed the regulator to reconsider Grayscale’s application, a ruling that served as a major win for the crypto company. However, some experts at the time noted that the victory did not mean an automatic endorsement of spot Bitcoin ETF.
Sam Bankman-Fried: From Crypto Darling to Criminal
November can be said to be one of the most eventful months in 2023 for the cryptocurrency industry. Sam Bankman-Fried, popularly known as SBF, whose company FTX fell in November 2022, was convicted nearly a year later of a seven-count charge, including fraud and conspiracy.
Following FTX’s collapse, Bankman-Fried resigned from his position as CEO of the crypto exchange. The former chief was subsequently arrested and later extradited to the United States.
After a month-long trial, which began in October 2023, a 12-man jury declared SBF guilty of all seven counts involving fraud, conspiracy, and money laundering, with the charges carrying a combined maximum sentence of 120 years in prison. Following the guilty verdict, Bankman-Fried’s defense lawyer said that his client maintained his innocence and would continue to fight the allegations.
SBF’s sentencing is scheduled for March 28, 2024, with a second trial also to happen in the same month. However, a recent letter, according to Bloomberg, revealed that Bankman-Fried will not face a second trial, with US prosecutors informing Judge Lewis Kaplan of their intention to drop the second set of charges, part of which accuse the former entrepreneur of bank fraud, trying to bribe foreign officials, and operating an unlicensed money transmitting business.
CZ Stepping Down and Binance’s $4 Billion Fine
Another major event happened in November, with the largest cryptocurrency exchange by market capitalization, Binance, paying a $4.3 billion fine in a settlement with United States regulators.
The company, which is facing regulatory issues from different watchdogs, chief among them the SEC, paid the hefty settlement., in addition to pleading guilty to various charges, including knowingly violating the Bank Secrecy Act.
Binance CEO Changpeng Zhao, popularly known as CZ, also pled guilty to contravening the Bank Secrecy Act, agreed to step down from his position and pay a personal fine of $50 million.
Meanwhile, CZ, who also resigned as chairman of the board of directors at Binance.US, will remain in the U.S. until his sentencing on Feb. 23, 2024, with a United States district court ruling in favor of the government, which claimed that he was a flight risk.
Binance’s former head of regional markets outside the U.S., Richard Teng, became the company’s new CEO.
Major Hacks in 2023
While hacking incidents in 2023 recorded less volume compared to 2022, there were still some notable hacks that occurred this year.
DeFi lending protocol Euler Finance lost $197 million worth of customer assets in March through a flash loan attack. In April, the project announced that the attacker returned all recoverable funds.
Crypto exchange Poloniex also fell victim to a hacking incident, causing the platform to lose $125 million in various assets, including Ether (ETH), USDT, USDC, and Shiba Inu (SHIB).
Another project, Mixin Network, suffered a $200 million loss in September after attackers exploited a vulnerability in the database of its cloud service provider. Shortly after the attack, the Mixin team appealed to the hacker to return the stolen funds while offering them a $20 million bug bounty reward.
Fingers Crossed for 2024
With 2024 just around the corner, the industry seems to be optimistic about a potential crypto bull run. Already, there have been massive Bitcoin (BTC) price predictions for 2024, which analysts and stakeholders believe will be propelled by a potential spot Bitcoin ETF approval and the upcoming Bitcoin halving event.
Bitwise recently predicted that BTC’s price will hit a new all-time high of $80,000 in 2024. Other predictions put the value of the crypto asset at $100,000 and above per coin also in 2024.
It remains to be seen how the new year will shape the crypto industry, with various activities and anticipations, but hopefully, the leap year will be good for the market.
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