Now that 2022 is winding down and 2023 is well under way, a review of some of the highlights of 2022 in cryptocurrency provides an opportunity to look at the developments of the past year with a fresh perspective and identify some patterns that could affect the coming year. Despite the growing interest and acceptance of cryptocurrencies, 2022 served as a wake-up call for many cryptocurrency enthusiasts who previously viewed cryptocurrencies as the โwild westโ. Massive loss of market value, notable and high-profile project failures and lawsuits, and new regulatory scrutiny combined to make 2022 an exciting year in crypto, but with significant ramifications for the entire industry, in 2023 and beyond. there.
Here are some of the top activities of 2022 that should shape the crypto market of 2023:
Increased regulation of cryptocurrencies
Authorities around the world, but especially in the United States, stepped up regulation of cryptocurrencies in 2022. And, in pursuit of comprehensive and clear regulation, President Biden issued a executive order direct federal agencies to develop a comprehensive plan for cryptocurrency regulation and enforcement.
As anticipated by many in the industry, traditional cryptocurrency seems to be accelerating towards โsafetyโ classification, with elements of traditional banking supervision. Some examples from last year include:
- The New York Department of Financial Services ("DFS") filed its first enforcement action against a DFS-licensed "virtual currency business": resulting in a $30 million deal with cryptocurrency investment platform Robinhood Crypto, LLC
- The US Securities and Exchange Commission charged 11 people in a alleged crypto pyramid and Ponzi scheme called Forsage.
- The Office of Foreign Assets Control (โOFACโ) of the US Department of the Treasury. Sanctioned and Banned Currency Mixer Tornado Cashalleging that the platform laundered more than $7 billion in virtual currency since its launch in 2019.
- The U.S. Department of the Treasury Financial Crimes Enforcement Network (โFinCENโ) and OFAC Enforcement Actions Settled With Washington State-Based Bittrex. In the two deals, Bittrex agreed to pay $29 million for allowing clients of its digital asset, or cryptocurrency, exchange to evade US sanctions in places like Syria, Iran and Cuba.
- The Department of Justice accused a former Coinbase employee with insider trading, in which the SEC made the almost unprecedented move to label nine different crypto tokens as securities, a move that signals a significant change in how cryptocurrencies will be treated in the future.
- The DOJ criminally charged six people in four separate cases of alleged cryptocurrency fraud, including the largest non-fungible token scheme known to date.
- Earlier in the summer, DFS published its first guide on stablecoinsrequiring that they be fully backed by a reserve segregated from the issuers' operating funds and periodically certified by an auditor.
- Celebrity spokeswoman Kim Kardashian has settled with the SEC on a fine of more than $1 million and a three-year ban from promoting cryptocurrency. related to your EthereumMax promotion.
More Enforcement Virtually Guaranteed: The SEC announced in May that it would increase its Cyber โโand Crypto Assets Unit by 20 positions, up to a total of 50 positions dedicated to protecting investors from cyber and crypto threats.
Additionally, President Biden called for a national policy, centered on six priorities:
- consumer and investor protection
- financial stability
- illicit financing
- United States leadership in the global financial system and economic competitiveness
- financial inclusion
- responsible innovation
Congress has also held at least 15 hearings in 2022 focused on cryptocurrency and blockchain policy. Two important bills: the Responsible Financial Innovation Act of 2022 and the Digital Products Consumer Protection Act of 2022 โ propose a regulatory framework for the industry. These bills and the presidential order suggest continued and accelerated crypto regulation in 2023.
Cryptographic controversies
While broader macroeconomic factors certainly affected cryptocurrency values โโand cryptocurrency-related stocks and companies, that's certainly not true of all cryptocurrency losses in 2022. Major players like Land and Three Arrows Capital suffered devastating losses that are not directly related to the general economic climate.
Of the controversial crypto crashes, perhaps none is as well known, publicized, and talked about as the longtime industry darling. FTX, the third largest crypto exchange at the time. FTX was known for flashy advertisements, A-list spokespersons, large political and charitable donations, and buying or financially supporting struggling crypto entities. FTX founder Sam Bankman-Fried was a cryptocurrency celebrity in his own right, frequently testifying before Congress on cryptocurrency and industry-related issues.
In November, however, FTX effectively collapsed due to liquidity problems, starting an almost unprecedented series of events. Losses are expected to exceed $8 billion, with John J. Ray III, who oversaw the Enron liquidation, stepping in to oversee the FTX liquidation.
In addition to attempts to recover losses, the collapse of FTX also led to lawsuits related to the accountability and responsibility of the spokespersonembroiling A-list celebrities like Tom Brady, Gisele Bundchen, and Larry David in the FTX collapse controversy.
FTX's celebrity endorsements weren't the only ones facing scrutiny; Despite some apparent misgivings from the court, Kim Kardashian and Floyd Mayweather, spokesmen for EthereumMax, avoided class action lawsuits for their promotion of that project. in a decision that may affect the liability of FTX spokespersons (although, as noted above, Ms. Kardashian did settle with the SEC.)
cryptocurrency crash
Cryptocurrencies are no stranger to boom and bust cycles, but 2022 was especially dramatic: the entire asset class lost roughly 70% of its value. Bitcoin, for example, started the year trading near $42,000, peaked at just over $46,000 a few months later, and then plunged to a low near $16,000 by the end of the year. To be sure, many of the related regulatory and legal entanglements are tied to the general collapse of the market.
2022 was a particularly wild ride for cryptocurrencies. 2023 is likely to be a bit more stable as markets, regulators, and lawyers continue to address some of the standout dramas of 2022, but the most important lesson of 2022 will endure: be prepared for anything!
