It appears that crypto is at a crossroads. Across markets, the legal and regulatory landscape, and the Web3 startup ecosystem, there is little disagreement among industry leaders that 2024 could shape up to be one of the most consequential crypto years ever. Whether these events will finally propel the industry out of winter to new heights or threaten it remains another question.
But don't panic, dear reader. While nothing about the future can ever be certain – especially when it comes to crypto – Decrypt spoke to analysts from the financial, political and NFT space to get a behind-the-scenes look.
After examining the near-term implications of a spot Bitcoin ETF and how crypto and traditional finance might meaningfully merge, here's a perspective on when there will finally be regulatory clarity for crypto in the United States.
As 2023 comes to a close, all eyes in the crypto space are on a handful of potentially important developments that will significantly expand the stability and reach of the industry.
But all of these looming advances only matter as long as crypto companies and startups are legally allowed to operate.
For years, sporadic enforcement actions and lengthy legal proceedings have defined the American government's relationship with the crypto sector. According to Miller Whitehouse-Levine, CEO of crypto lobbying group DeFi Education Fund, 2024 appears poised to finally bring longed-for certainty to U.S. crypto regulation – for better or worse.
“There were a lot of actions, but not a lot of decisions,” Whitehouse-Levine told Decrypt. “But… a lot of things are coming to a head. Developments in the judiciary and executive branch will be extremely consequential over the next year.”
On the schedule for 2024, to name just a few key pending cases – a legal challenge by Coinbase to the SEC's refusal to clarify its crypto rules; an impending Supreme Court case that could result in federal agencies like the SEC being stripped of the ability to define their own authority; and a conclusion to Ripple's fight against the SEC over the definition of numerous cryptocurrencies as securities.
And that's not to mention several proposed executive agency rules that, if enacted in 2024, could have even broader implications: an SEC rule that would expand its definition of “exchange” to include crypto, an IRS rule, which would expand the term “broker” to effectively ban DeFi, and a Treasury Department rule that would blacklist any cryptocurrency mixer as a national security threat.
“This [decisions] “It will have a major impact on the entire industry and how regulation will proceed in this country in the future,” Whitehouse-Levine said.
The range of possible outcomes of these upcoming decisions is huge. For example, if the IRS pushes forward with its “brokerage” rules and the policy withstands judicial scrutiny, much of the American crypto ecosystem will collapse, according to Whitehouse-Levine.
“That would all but completely stop the development of decentralized systems in the United States,” he said.
On the other hand, if Coinbase wins its lawsuit against the SEC, that decision would likely force Congress to finally recognize the need to act and create a regulatory framework for the industry, he says.
However, how beneficial would this legislation be? Would it be led and defined by vocal cryptocurrency advocates or just equally prominent enemies? And how quickly would it actually be passed at a time of historic dysfunction in Congress?
When it comes to Congress, Whitehouse-Levine has come to terms with the fact that there is next to no point in predicting anything.
“I have no idea,” he said.