By all accounts, crypto is at a crossroads. Across markets, the legal and regulatory landscape, and the Web3 startup ecosystem, there’s little disagreement among industry leaders that 2024 could shape up to be one of crypto’s most consequential years yet. Whether those events will finally lift the industry out of winter to new highs, or imperil it, remains another question.
But do not panic, dear reader. While nothing about the future can ever be certain—least of all when it comes to crypto—Decrypt has spoken to analysts across finance, policy, and the NFT space to peek behind the curtain.
After examining the short-term impact of a spot Bitcoin ETF and how crypto and traditional finance could meaningfully merge, here's perspective on when regulatory clarity will finally come to crypto in the United States.
At the close of 2023, all eyes in crypto are on a handful of potentially major developments that are poised to vastly expand the industry’s stability and reach.
But all of that looming progress only matters so long as crypto firms and startups are legally permitted to operate.
For years, sporadic enforcement actions and dragged-out lawsuits have defined the American government’s relationship to the crypto sector. According to Miller Whitehouse-Levine, CEO of crypto lobbying group DeFi Education Fund, 2024 looks poised to finally bring some much-craved certainty to U.S. crypto regulation—for better or worse.
“There's been a lot of action, but not a lot of decisions,” Whitehouse-Levine told Decrypt. “But… a lot is coming to a head. Developments in the judiciary and in the executive are going to be extremely impactful next year.”
On the docket for 2024, to name just a few major, pending cases—a Coinbase legal challenge to the SEC’s refusal to clarify its rules on crypto; an upcoming Supreme Court case that could see federal agencies like the SEC stripped of the ability to define their own powers; and a conclusion to Ripple’s battle against the SEC over the definition of numerous cryptocurrencies as securities.
And that’s to say nothing of several proposed executive agency rules that, if cemented in 2024, could have even more massive implications: an SEC rule that would broaden its definition of “exchange” to envelop crypto, an IRS rule that would broaden the term “broker” to effectively outlaw DeFi, and a Treasury Department rule that would blacklist any cryptocurrency mixer as a national security threat.
“Those [decisions] will have major effects across the entire industry, and on how regulation will proceed in the future, in this country,” Whitehouse-Levine said.
The spectrum of possible outcomes from those pending decisions is vast. If the IRS moves forward with its “broker” rulemaking, for example, and the policy withstands judicial review, Whitehouse-Levine says much of the American crypto ecosystem will collapse.
“That would pretty much cease development of decentralized systems in the U.S. completely,” he said.
On the other hand: If Coinbase were to win its challenge against the SEC, that decision would likely force Congress to finally acknowledge the need to act, and establish a regulatory framework for the industry, he says.
How favorable would that legislation be, though? Would it be spearheaded and defined by crypto’s vocal proponents, or just as prominent enemies? And amidst a period of historic congressional dysfunction, how soon would it actually be passed?
When it comes to Congress, Whitehouse-Levine has made peace with the fact that there’s pretty much no point in predicting anything.
“I have no idea,” he said.
Crypto Crystal Ball is a series examining the hottest industry topics ahead in 2024. Stay tuned for additional perspectives in the coming days.
Edited by Andrew Hayward