Since early May, the wave of layoffs in the crypto sector has continued to spread, and entering 2023 has not brought a 'new year, new beginning' shift. According to statistics, the crypto industry lost more than 26,000 jobs cumulatively in 2022, and as of press time, the total number of layoffs in 2023 is no less than 1,900.

It is hard to predict when the layoff trend will ease, but Binance is bucking the trend. After hiring 5,000 employees last year, its CEO Changpeng Zhao said at a crypto finance conference in Switzerland on January 11 that he hopes to expand Binance's workforce by 15% to 30% this year.

'We will continue to build and hopefully accelerate expansion again before the next bull market arrives,' Zhao said.

However, the bull market may still require patience. According to Forbes, on average, a crypto winter lasts four years. Considering that Bitcoin's mysterious inventor Satoshi Nakamoto only released it 14 years ago, four years is not short. The previous crypto winter lasted from the end of 2017 to the end of 2020, spanning three years, after which prices surged to an all-time high in November 2021.

In traditional securities, a bear market typically refers to a 20% decline in market indices. Although there is no official definition of a crypto winter, 2022 was undoubtedly bone-chilling. In May, one of the most well-known stablecoins depegged from the dollar, triggering market turmoil. Throughout the year, several well-known trading platforms—Celsius, Voyager Digital, FTX, and BlockFi—collapsed one after another. Bitcoin's price fell by as much as 77%.

However, Bitcoin has seen a slight rebound in recent weeks. As of January 25, Bitcoin climbed above the $23,000 mark for the first time since August last year.

Bradley Duke, co-CEO of ETC Group, said this month that Bitcoin's rise was mainly driven by 'waning macro concerns,' with improving U.S. economic data, including falling inflation figures and strong job growth.

In fact, the U.S. Consumer Price Index (CPI) posted its largest decline since the early days of the COVID-19 pandemic. However, bank CEOs still adhere to the recession forecasts made last autumn. Bank of America CEO Brian Moynihan told investors on January 13 that the bank is preparing for a 'mild recession' and has implemented some hiring freezes.

Goldman Sachs Enters

Meanwhile, Goldman Sachs on January 23 listed Bitcoin as the best-performing asset of 2023, with a total return of 27% and a risk-adjusted ratio of 3:1. In December last year, reports emerged that after FTX's collapse, the bank planned to spend tens of millions of dollars to acquire or invest in crypto companies.

Goldman Sachs' head of digital assets, Mathew McDermott, told Reuters that FTX's collapse 'highlighted the demand for more credible, regulated cryptocurrency participants, and large banks see an opportunity to take on business.'

Goldman Sachs CEO David Solomon expressed a similar view in a Wall Street Journal op-ed in December last year, at least regarding the technology driving cryptocurrency. He said the benefit of letting regulated financial institutions develop blockchain applications is that they 'are accustomed to high standards of regulatory oversight... and can work with regulators and policymakers to find the right balance between regulation and innovation.'

Solomon wrote that FTX's downfall and its ripple effects 'should not distract us from the opportunities at hand.' 'Investors of all sizes can benefit from blockchain innovations guided by mature, experienced institutions.'

Other Supporters?

Is Solomon's support enough to keep other banks interested in crypto after the challenges of the past year? JPMorgan Chase CEO Jamie Dimon is not convinced. However, that has always been his stance. (Though the bank does own a cryptocurrency wallet trademark.)

Metropolitan Commercial Bank announced this month that it is exiting the crypto space; meanwhile, crypto-friendly Signature Bank is planning to divest $8 billion to $10 billion in digital assets to significantly reduce its crypto portfolio.

Acting Comptroller of the Currency Michael Hsu told Bloomberg in December last year that as token values fell, most banks' curiosity about crypto 'evaporated' in 2022, and he would be 'shocked' if any bank now showed interest in the asset class.

However, BNY Mellon CEO Robin Vince said on this month's earnings call that since launching its crypto custody service in October last year, digital assets have been and will continue to be a focus for the bank.

Vince emphasized in a Financial Times op-ed in December last year that establishing a regulatory framework for digital assets like crypto is crucial, noting that 'much of the foundation already exists and can be extended from the regulation of traditional assets.'

'We should embrace digital asset innovation and combine it with established rules and prudent regulatory principles to protect customers and promote resilience,' Vince wrote. 'In doing so, we also protect our most valuable asset—confidence in our financial system.'

Regulatory Outlook

Crypto regulation was already a hot topic before FTX's collapse. Sam Bankman-Fried, founder of the now-bankrupt exchange, testified before Congress in 2021 and later tweeted that he was 'excited' to work with those in power to refine the regulatory landscape. Although any legislative proposals associated with him are now almost certainly stalled, legislators and consumers want to see crypto regulation more than ever.

Although no specific measures have been introduced, regulators have recently provided extensive guidance. The Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation issued a joint warning in January about the risks banks face from crypto-related activities. The Basel Committee on Banking Supervision almost simultaneously published guidance for banks venturing into digital assets. The New York Department of Financial Services also announced in December last year that any bank it regulates must obtain prior approval before engaging in crypto-related activities, and those already doing so must contact regulators immediately.

Adrienne Harris, superintendent of the New York Department of Financial Services, said the new guidance is 'critical to ensuring that consumers' hard-earned money is protected, that New York-regulated banking institutions remain resilient and competitive, and that institutions wishing to submit proposals for virtual currency-related activities have clear expectations.'

However, regulators still disagree over jurisdiction in the crypto space, which may be delaying regulatory progress. Last week, SEC Commissioner Hester Peirce said the SEC should regulate digital assets like crypto through rulemaking.

'If we continue with our current pace of 'regulation by enforcement,' it would take about 400 years to process all tokens suspected of being securities,' she said at a Duke University conference on January 20, as reported by Pensions & Investments. 'In contrast, once SEC rules take effect, they have universal (though non-retroactive) coverage.'

Also at Duke University, CFTC Commissioner Kristin Johnson urged Congress to include in any new legislation 'granting the CFTC statutory authority to conduct effective due diligence on firms seeking to acquire CFTC-regulated entities, including crypto companies.'

Whatever else happens in 2023, the aftermath of last year's events will be processed gradually. Bankruptcy hearings for the FTX case are scheduled through April. Claims against Celsius (which was just granted court approval to allow some customers to withdraw funds, with additional hearing dates to come) must be filed by February 9.

New York Attorney General Letitia James' alleged fraud lawsuit against former Celsius CEO Alex Mashinsky will also continue.

Additionally, unless a plea deal is reached, Bankman-Fried will stand trial in federal court in October on charges including wire fraud and conspiracy to commit money laundering. Former FTX executives Caroline Ellison, Gary Wang, and Nishad Singh are all cooperating with authorities in the case against Bankman-Fried. Bankman-Fried has pleaded not guilty to all eight charges.