This past year was a pivotal one in terms of the crypto industry’s relationship with regulators and financial markets. U.S. authorities cracked down on major players and financial titans threw their hats in the ring as mainstream finance took steps to accept, if not embrace, crypto.

BlackRock Files for Bitcoin ETF

Bitcoin’s price has recovered significantly from the lows seen in late 2022, and much of the renewed interest in the crypto asset has to do with the potential for at least one spot Bitcoin ETF to be approved by early next year. While futures-based Bitcoin ETFs already exist, several applications for spot Bitcoin ETFs in the past have been declined. The entrance of BlackRock in the spot bitcoin ETF arena changed everything in June.

BlackRock’s ETF application was seen as a major step forward for crypto. The firm is one of the world’s largest asset managers and could confer a greater level of credibility to the crypto market. Once BlackRock entered the race, other industry giants, such as Fidelity, renewed pushes for their own spot ETF offerings.

The approval of a spot Bitcoin ETF would be a pivotal moment for the crypto asset in terms of regulation and trust. Experts estimate a spot Bitcoin ETF could bring tens of billions of dollars in new money into the Bitcoin market in a matter of years. For now, the Securities and Exchange Commission (SEC) has until Jan. 10 to decide on Ark Invest’s ARK 21Shares Bitcoin ETF.

Sam Bankman-Fried Found Guilty of Fraud

Just last year, FTX CEO Sam Bankman-Fried was seen by his supporters as the wunderkind of the crypto industry and potentially the world’s first trillionaire. Now, he’s awaiting sentencing after being found guilty of fraud and conspiracy for the role he played in the misuse of customer funds at his exchange.

While SBF may be getting his just desserts, the reality is that many FTX customers have been burned and may never be made whole. Even though FTX intends to return 90% of recovered assets to customers, depositors won’t recapture the true value of the funds they had on the exchange at the time of its bankruptcy. That’s because not all assets will be recovered and those depositors have missed out on this year’s crypto rally.

The entire FTX saga is a stark reminder that many of the benefits of crypto are lost when users don’t control their private keys. Whether crypto users will take self-custody more seriously in the future remains to be seen.

DOJ Charges Binance and ‘CZ’

Recently, members of Congress have regained their interest in guarding against the use of crypto for financial crimes. That concern was brought to the fore by recent charges by the U.S. Department of Justice (DOJ) against Binance Holdings Ltd., the largest crypto exchange in the world. In November, Binance and its founder Changpeng Zhao, known as “CZ,” pleaded guilty to money laundering charges and agreed to pay $4.3 billion in fines and settlements.

Treasury Secretary Janet Yellen said the exchange allowed “illicit actors to transact freely, supporting activities from child sexual abuse, to illegal narcotics, to terrorism, across more than 100,000 transactions.”

Binance’s plea is more evidence that the “Wild West” days of crypto may be coming to an end. Investors now may want to think about other areas where stricter compliance with anti-money laundering regulations could be enforced, such as with stablecoins.

Coinbase, Kraken, and Binance Charged by SEC

Binance was sued by the SEC in June for operating an unregistered securities exchange, as were Coinbase, also in June, and Kraken, in November.

The action against Coinbase was particularly noteworthy, as the company has frequently touted its openness to work with U.S. regulators and comply with rules. Regardless of Coinbase’s intentions, the reality is the exchange has listed assets that the SEC deems securities.

At the heart of the matter is a disagreement over what counts as a security and who has the authority to decide. Coinbase CEO Brian Armstrong said in April that he would consider moving the exchange if Congress and regulators didn’t provide greater clarity on crypto regulations in the next few years. Even federal officials, like Commodity Futures Trading Commission Chair Rostin Behnam, have said the U.S. regulatory framework needs clarifying.

The industry in 2024 will continue to seek greater clarity on which crypto assets are securities and which are commodities. In the meantime, the SEC will likely continue to operate under Chair Gary Gensler’s belief that “everything other than bitcoin,” falls under its purview.