bitcoin price rises again. Major financial companies are showing renewed interest in digital currencies. And cryptocurrency fans are celebrating the end of a long period of depressed prices and trading collapses.
But the sudden burst of optimism came at a turbulent time for the cryptocurrency industry.
The last time cryptocurrency prices soared, the industry's most influential executives were Sam Bankman-Fried and Changpeng Zhao, rival billionaires whose online showdowns could move markets. Now Mr. Bankman-Fried, founder of the FTX cryptocurrency exchange, and Mr. Zhao, who ran the world's largest cryptocurrency company, Binance, face prison terms after parallel falls from power.
A federal jury convicted Bankman-Fried last month on fraud and conspiracy charges stemming from the collapse of FTX. Three weeks later, Mr. Zhao pleaded guilty to one count of money laundering and agreed to give up control of Binance.
With the two men out of the picture, a crowded field of crypto entrepreneurs, Wall Street executives and government regulators are vying to control the industry's next chapter. Their fight for influence could determine whether cryptocurrencies survive in the United States, where a regulatory crackdown has made it increasingly difficult for the industry to operate.
Some executives have argued that the cryptocurrency world needed to purge figures like Zhao and Bankman-Fried – aggressive entrepreneurs who prioritized growth over compliance – to win over regulators and the public.
Following Mr. Zhao's guilty plea, Brian Armstrong, CEO of Coinbase, the US-based cryptocurrency exchange, hailed the case as a turning point for the industry.
“Now we have the opportunity to start a new chapter,” Armstrong said. aware on social media last month. “This industry should be built right here in the United States, in a way that complies with American laws.”
But the cryptocurrency world is still full of companies that engage in risky business practices and don't offer much transparency about their experimental products.
“There's no intrinsic value in any of this,” said Hilary Allen, a financial regulation expert at American University. “The only hope is to have more money floating around and more people willing to buy it to create demand.”
Cryptocurrencies have always had their share of influential leaders. The vision behind bitcoin, the original and most valuable digital currency, was first laid out by someone using the pseudonym Satoshi Nakamoto, whose mysterious identity became his own brand.
As the crypto world expanded, new centers of power and influence emerged. Zhao founded Binance in 2017 and built it into the world's largest marketplace for buying and selling experimental coins. The size and scope of the exchange made Mr. Zhao a star on Twitter, now known as cryptocurrencies.
Zhao's main rival was Bankman-Fried, who appeared on billboards and magazine covers, cultivating a persona as the responsible adult who would help the fledgling industry work with regulators.
In the end, both Mr. Zhao and Mr. Bankman-Fried fell from grace. Bankman-Fried will be sentenced in March and faces the prospect of decades behind bars. Zhao is likely to receive a lighter sentence, with prosecutors expected to ask for around 18 months.
“Having those characters no longer be in the plot is a really good thing,” said Jeremy Allaire, CEO of cryptocurrency company Circle. “I am and have been focused on: How can we make this useful to the world?”
A new generation of executives is already emerging as the industry's leading cheerleaders. Paolo Ardoino, a cryptocurrency enthusiast with a large online following, recently took over as CEO of Tether, the company that oversees one of the most popular digital currencies. At Binance, Zhao was replaced by Richard Teng, a key executive at the exchange who had been groomed to take Zhao's place.
On paper, Teng is the opposite of Zhao. The Binance founder was antagonistic toward regulators, while Teng is a veteran of the Monetary Authority of Singapore, the country's central bank.
Binance's future is uncertain. As part of a settlement last month, the company agreed to pay a $4.5 billion fine to various government agencies and have a U.S. monitor embedded in the business for the next three years.
“My overall feeling is that there is a real 'wait and see,'” Allaire said. “I don't think anyone knows the details of what that monitoring means.”
A Binance spokeswoman did not respond to a request for comment.
Arguably the biggest beneficiary of the current cryptocurrency shakeup is Coinbase's Mr. Armstrong, who declared this month that bitcoin “may be the key to extending Western civilization.” Coinbase's stock price has nearly tripled in the past six months, even after the Securities and Exchange Commission sued the company as part of the agency's broad crackdown on the industry.
“Coinbase is now the last man standing,” said John Todaro, a Needham analyst who follows the cryptocurrency industry. “There's less competition out there.”
Coinbase has also positioned itself to benefit from a potentially seismic development in the cryptocurrency world: the possible approval of an exchange-traded fund, or ETF, that tracks the price of bitcoin.
In recent days, the price of bitcoin has risen to more than $43,000, its highest level since a wave of bankruptcies plunged the industry into crisis last year. Much of the enthusiasm is fueled by growing confidence that the SEC is prepared to approve a bitcoin ETF that would list on traditional stock exchanges, potentially bringing new money into the industry.
Coinbase agreed to store the bitcoin that would be the basis of an ETF offered by BlackRock, one of the world's largest asset managers. BlackRock is the largest of several major financial firms, including Fidelity, that have applied to offer the investment product.
Wall Street was once the enemy of the insurgent crypto industry, but after 18 painful months of bankruptcies and arrests, cryptocurrency advocates have welcomed the collaboration between Coinbase and BlackRock as a potential salvation.
“Cryptocurrencies are not disrupting Wall Street; it is merging with it,” said Allen, a professor at American University. “It's pretty obvious: They think they can make some money here.”
