The price of Bitcoin is surging again. Major financial firms are showing renewed interest in digital currencies. And crypto fanatics are celebrating the end of a long period of depressed prices and business collapses.
But the sudden explosion of optimism has come at a turbulent moment for the cryptocurrency industry.
The last time crypto prices were skyrocketing, the industry’s most influential executives were Sam Bankman-Fried and Changpeng Zhao, rival billionaires whose online sparring could move markets. Now Mr. Bankman-Fried, the founder of the FTX crypto exchange, and Mr. Zhao, who ran the world’s largest crypto firm, Binance, both face prison time after parallel falls from power.
A federal jury convicted Mr. Bankman-Fried last month on fraud and conspiracy charges stemming from FTX’s collapse. Three weeks later, Mr. Zhao pleaded guilty to a money laundering charge and agreed to relinquish control of Binance.
With the two men out of the picture, a crowded field of crypto entrepreneurs, Wall Street executives and government regulators are vying to control the industry’s next chapter. Their scramble for influence could determine whether crypto survives in the United States, where a regulatory crackdown has made it increasingly difficult for the industry to operate.
Some executives have argued that the crypto world needed to purge figures like Mr. Zhao and Mr. Bankman-Fried — aggressive entrepreneurs who gave priority to growth over compliance — to win over regulators and the public.
After Mr. Zhao’s guilty plea, Brian Armstrong, the chief executive of the U.S.-based crypto exchange Coinbase, hailed the case as a turning point for the industry.
“We now have an opportunity to start a new chapter,” Mr. Armstrong posted on social media last month. “This industry should be built right here in America, in a compliant way, under U.S. law.”
But the crypto world remains filled with companies that engage in risky business practices and don’t offer much transparency about their experimental products.
“There is no intrinsic value to any of this,” said Hilary Allen, an expert on financial regulation at American University. “The only hope is to have more money sloshing around, and more people willing to buy into it to create demand.”
Crypto has always had its share of influential leaders. The vision behind Bitcoin, the original and most valuable digital currency, was first laid out by someone using the pseudonym Satoshi Nakamoto, whose mysterious identity became its own brand.
As the crypto world expanded, new centers of power and influence emerged. Mr. Zhao founded Binance in 2017 and built it into the world’s largest marketplace for buying and selling experimental coins. The exchange’s size and reach turned Mr. Zhao into a star on Twitter, now known as X, where he accumulated more than eight million followers, dismissing government lawsuits and allegations of illegal conduct as disinformation spread by crypto’s enemies.
Mr. Zhao’s chief rival was Mr. Bankman-Fried, who appeared on billboards and magazine covers, cultivating a persona as the responsible adult who would help the fledgling industry work with regulators.
In the end, both Mr. Zhao and Mr. Bankman-Fried fell from grace. Mr. Bankman-Fried is set to be sentenced in March, and faces the prospect of decades behind bars. Mr. Zhao is likely to receive a lighter sentence, with prosectors expected to request about 18 months.
“Having those characters not in the plot anymore is a really good thing,” said Jeremy Allaire, the chief executive of the crypto company Circle. “I’m focused and have been focused on: How do we make this useful for the world?”
A new generation of executives is already emerging as the industry’s top cheerleaders. Paolo Ardoino, an outspoken crypto enthusiast with a vast online following, recently took over as the chief executive of Tether, the company that oversees one of the most popular digital currencies. At Binance, Mr. Zhao was replaced by Richard Teng, a key executive at the exchange who had been groomed to step into Mr. Zhao’s shoes.
On paper, Mr. Teng is Mr. Zhao’s opposite. The Binance founder was antagonistic toward regulators, while Mr. Teng is a veteran of the Monetary Authority of Singapore, the country’s central bank.
Binance’s future is uncertain. As part of a settlement last month, the company agreed to pay a $4.5 billion fine to several government agencies and have a U.S. monitor embedded in the business for the next three years.
“My general sense is there’s a real ‘wait and see,’” Mr. Allaire said. “I don’t think anyone knows the details of what that monitorship means.”
A Binance spokeswoman did not respond to a request for comment.
Arguably the biggest beneficiary of crypto’s current reshuffle is Coinbase’s Mr. Armstrong, who declared this month that Bitcoin “may be the key to extending western civilization.” Coinbase’s share price has nearly tripled over the past six months, even after the Securities and Exchange Commission sued the firm as part of the agency’s broad crackdown on the industry.
“Coinbase is now the last man standing,” said John Todaro, an analyst at Needham who tracks the crypto industry. “There’s less competition out there.”
Coinbase has also positioned itself to profit from a potentially seismic development in the crypto world — the possible approval of an exchange-traded fund, or E.T.F., that tracks the price of Bitcoin.
In recent days, Bitcoin’s price has surged to over $43,000, its highest level since a wave of bankruptcies sent the industry into crisis last year. Much of the enthusiasm is fueled by growing confidence that the S.E.C. is poised to approve a Bitcoin E.T.F. that would trade on traditional stock exchanges, potentially bringing new money into the industry.
Coinbase has agreed to store the Bitcoin that would underlie an E.T.F. offered by BlackRock, one of the world’s largest asset managers. BlackRock is the biggest of several major financial firms, including Fidelity, that have applied to offer the investment product.
Wall Street was once the enemy of the insurgent crypto industry, but after a bruising 18 months of bankruptcies and arrests, crypto proponents have greeted the collaboration between Coinbase and BlackRock as a potential salvation.
“Crypto isn’t disrupting Wall Street; it’s merging with it,” said Ms. Allen, the American University professor. “It’s fairly obvious — they think they can make some money here.”