Amid regulatory reshuffle, the crypto industry is quietly brewing a battle for the top

A year ago, Sam Bankman-Fried (SBF) and Changpeng Zhao were running two of the largest cryptocurrency companies. As they grappled with legal woes, other players were working to usher in a new chapter for the industry.

Bitcoin prices have surged again this year, as traditional mainstream financial companies have shown new interest in digital currencies and crypto enthusiasts are celebrating the end of the bear market and crypto business malaise.

But the sudden burst of optimism comes at a turbulent time for the crypto industry.

During the last crypto bull run, the industry’s most influential figures were SBF and Zhao Changpeng, billionaires and rivals whose every word and action seemed to move the market. Now, both have stepped down and could face jail time.

Last month, a federal jury convicted SBF on fraud and conspiracy charges stemming from the collapse of FTX . Three weeks later, CZ pleaded guilty to money laundering charges and agreed to relinquish control of Binance .

With the two men out, cryptocurrency entrepreneurs, Wall Street executives and government regulators are vying to control the industry’s next chapter. Their tussle for influence could determine whether crypto survives in the United States, where a regulatory crackdown has made it increasingly difficult to operate.

Some executives believe that the crypto world needs to be cleared of figures like CZ and SBF – activist entrepreneurs who prioritize growth over compliance in order to win favor with regulators and the public.

Following CZ’s guilty plea, Brian Armstrong, CEO of U.S. cryptocurrency exchange Coinbase, hailed the case as a turning point for the industry.

He posted on social media: "We now have the opportunity to open a new chapter. This industry should be established in the United States, in a compliant manner, and in accordance with American law."

But the crypto industry remains filled with companies that engage in risky business practices and don’t provide much transparency into their emerging products.

“There’s no intrinsic value in any of this,” said Hilary Allen, an expert on financial regulation at American University. “The only hope is that there’s more money flowing around and more people willing to buy it to create demand.”

The cryptocurrency space has always had some influential leaders. The vision behind Bitcoin, the original and most valuable digital currency, was first proposed by the anonymous “ Satoshi Nakamoto ”, whose mysterious identity has helped make Bitcoin a “brand”.

As the crypto industry expands, new centers of power and influence emerge. Zhao Changpeng founded Binance in 2017 and built it into the world’s largest marketplace for buying and selling tokens. The exchange’s size and influence made Zhao a popular figure on Twitter (now known as X ), where he has amassed more than 8 million followers and often dismisses government lawsuits and allegations of illegal behavior as false information spread by “hostile forces” who dislike crypto.

Zhao's main rival is SBF, who frequently appears on billboards and magazine covers, cultivating a persona as a responsible adult and helping the emerging industry work with regulators.

In the end, both fell from grace. SBF will be sentenced in March and faces decades in prison. Cho's sentence is likely to be lighter, with prosecutors expected to ask for around 18 months.

“It’s really good to have these characters removed from the industry moving forward,” said Jeremy Allaire , CEO of cryptocurrency firm Circle . “I’ve always been focused on: How do we make this useful to the world?”

A new generation of executives has emerged as the crypto industry’s top spokespersons.

Paolo Ardoino , an outspoken cryptocurrency enthusiast with a large online following, recently took over as CEO of Tether , the company that manages one of the most popular digital currencies. At Binance, CZ was replaced by Richard Teng, a key executive at the exchange.

On the surface, Teng and CZ have different industry experience. CZ has a history of being hostile to regulators, while Teng is a veteran of the Monetary Authority of Singapore, the central bank of Singapore.

Binance’s future is uncertain. As part of a settlement reached last month, the company agreed to pay $4.5 billion in fines to multiple government agencies and keep U.S. regulators involved in the business for the next three years.

“My general feeling is that there really is a ‘wait and see’ approach,” Allaire said. “I don’t think anyone knows the details of what that oversight means.”

A Binance spokesperson did not respond to a request for comment.

Arguably the biggest beneficiary of the current crypto shakeout is Coinbase’s Armstrong, who this month declared that bitcoin “may be the key to expanding Western civilization.” Coinbase’s stock price has nearly tripled in the past six months, despite the SEC suing the company as part of the agency’s broad crackdown on the industry.

“Coinbase is the last man standing right now,” said John Todaro, an analyst at Needham who follows the cryptocurrency industry. “There’s less competition out there.”

Coinbase is also positioning itself to profit from a potentially huge development in the crypto world — the possible approval of an exchange-traded fund (ETF) that tracks the price of bitcoin.

The price of bitcoin has surged above $43,000 in recent days, its highest level since a wave of bankruptcies plunged the industry into crisis last year. Enthusiasm has been fueled by growing confidence that the U.S. Securities and Exchange Commission is poised to approve a bitcoin ETF that would trade on traditional stock exchanges, which could bring new money to the industry.

Coinbase has agreed to custody the bitcoin that will serve as the basis for 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 cryptocurrency industry, but after 18 months of pain from bankruptcies and regulatory crackdowns, cryptocurrency supporters see the partnership between Coinbase and BlackRock as potential salvation.

Allen, the American University professor, commented: “Cryptocurrencies are not disrupting Wall Street; they are “merging with it” and “the reason is quite obvious – they see a lot of opportunities to make money here.”