Cryptocurrencies are experiencing a remarkable resurgence after enduring a tumultuous phase marked by the downfall of key industry players in 2022. The collapse of FTX, a leading company in the sector, had plunged Bitcoin to about $16,500, a steep fall from its peak of approximately $68,000 in November 2021.

However, following the conviction of FTX CEO Sam Bankman-Fried in November, there has been a significant rebound in the crypto market. Bitcoin, notably, has risen above $43,000.

Helen Gugel, a partner at Ropes & Gray, acknowledges the sector’s challenges but sees reasons for optimism. This phase marks a cleansing of the industry, eliminating harmful elements and restoring faith in cryptocurrencies.

Bankman-Fried’s conviction on all seven charges he faced symbolized a dramatic downfall for the once-lauded “crypto’s golden boy.” His future now potentially includes a lifetime in prison.

Shortly thereafter, a major plea agreement was announced by Attorney General Merrick Garland with Binance, another crypto heavyweight. In this deal, Binance agreed to pay $4.3 billion in fines, and its founder, Changpeng Zhao, known as CZ, stepped down as CEO and admitted to violating anti-money-laundering laws, also agreeing to a $50 million fine.

Despite these high-profile convictions potentially casting a shadow over the industry, many in the crypto community view these developments positively, interpreting them as steps towards restoring integrity in the sector.

The crypto market surged post-Bankman-Fried’s conviction. Companies like Coinbase, another major cryptocurrency exchange under regulatory scrutiny, saw their shares increase by over 400% this year.

Another factor fuelling crypto’s resurgence is the interest of major financial firms like BlackRock and Fidelity in a spot bitcoin ETF. These firms have petitioned the Securities and Exchange Commission (SEC) for its approval, aiming to integrate bitcoin into mainstream investment portfolios.

Despite the SEC’s past rejections of such proposals due to concerns about market manipulation, a lawsuit by Grayscale Investments and a subsequent court decision have bolstered hopes for approval, which would further legitimize digital currencies.

However, regulators remain cautious. The SEC has filed multiple suits against leading crypto companies, including Coinbase and Kraken. Gary Gensler, SEC Chair, has compared crypto to “the Wild West,” indicating a continued apprehensive stance.

The coming year is expected to see more enforcement actions in the crypto space, with Wharton professor Kevin Werbach predicting a focus on major players. The ongoing tension between regulators and crypto companies revolves around the lack of clear rules governing digital currencies.

As 2024 approaches, an election year, significant regulatory advancements seem unlikely. Despite crypto’s recovery, the industry’s battle with regulators and law enforcement is far from resolved.