Crypto wants to regain its shine. How the cleanup effort is taking shape

SAN FRANCISCO — At a cryptocurrency conference in Denver this month, a group of singers dressed in bright orange onesies took the stage to perform what an industry website later described as an anthem for the crypto faithful, a “blockchain ‘Blowin’ in the Wind”. ‘”

The chorus was a list of crypto’s most notorious bad guys, from talkative entrepreneur Do Kwon to disgraced FTX founder Sam Bankman-Fried, punctuated with four-letter expletives.

“In the next bull market, we promise not to use,” the song continues, “centralized exchanges run by these toxic dudes.”

After a disastrous 2022, when a trail of prominent crypto companies imploded, the industry is looking for a bold rebrand. Executives like Kwon and Bankman-Fried — once beloved crypto celebrities, with hundreds of thousands of followers hooked to each of their tweets — are now personae non gratae. Their former admirers claim that these crypto villains never truly embodied the core values ​​of the industry, even before their companies collapsed.

At surviving companies, senior executives are looking for new ways to market products that many consumers now distrust — and to distance themselves from former colleagues and mentors who could face years in prison. Some companies are trying to capitalize on the growing interest in artificial intelligence, with encryption schemes that feature convoluted ties to AI. Others seek to replace the word “crypto”, arguing that the industry’s original nomenclature has become irreparably tainted.

Crypto companies were “gradually moving toward a narrative shift” even before the Bankman-Fried exchange failed in November, said Todd Irwin, chief strategy officer at Fazer, a branding agency that has clients in industry. “After the FTX incident, the move was accelerated.”

The cleaning effort is a familiar routine in an industry that has seen repeated ups and downs in its short history. Early bitcoin proponents had to convince the public and regulators that the cryptocurrency was more than just a convenience tool for drug traffickers. A major crypto boom in 2017 was followed by a long period of law enforcement scrutiny as exciting-sounding startups were exposed as scams.

So far, the latest round of soul-searching has done little to redress the industry’s situation. Since FTX’s demise, US regulators have announced fines and other enforcement actions against several major crypto firms. The abrupt bankruptcies of two reliable banking partners, Silvergate Capital and Signature Bank, have dealt a further blow to crypto startups, making it more difficult to conduct basic business operations in the United States.

And the industry is still struggling to demonstrate the practical value of its technology to an increasingly skeptical public.

“Rebranding doesn’t solve the fundamental problem,” said Lee Reiners, a former supervisor at the Federal Reserve Bank of New York who now teaches at Duke Law School. ” What is it for ? What problem does it solve? It’s just public relations.

A year ago, the crypto industry was teeming with money. At its compound in the Bahamas in April, Bankman-Fried hosted a week-long conference in which attendees drank champagne and partied on the beaches. Among the guests: Su Zhu, one of the founders of crypto hedge fund Three Arrows Capital, which went bankrupt a few weeks later when a stock market crash sent all major cryptocurrencies plummeting.

Now Bankman-Fried is facing charges for his handling of FTX, which could mean decades in prison if convicted, and industry executives are still dealing with the fallout.

Steven Saxton phoned a bank this year to discuss his crypto startup, Gorilla Labs, which plans to offer a stablecoin, a type of cryptocurrency designed to hold $1 in value.

“My CTO said crypto about five times during the conversation. I was like, ‘Just say ‘blockchain,’” Saxton said. “These guys might be very sensitive to that, and it might make them very nervous. “

But even “blockchain” – the term for the publicly visible ledger where crypto transactions are recorded – has potentially negative connotations. In January, crypto mining company Riot Blockchain changed its name to Riot Platforms. Other companies have removed the term “crypto” from their marketing materials, turning to more vague words like “decentralization”.

“They’re just wearing a different outfit to the same party,” said branding expert Irwin.

The marketing push extends to the world of artificial intelligence, which replaced crypto as a hot trend in Silicon Valley following the release of viral chatbot ChatGPT. A series of AI-themed cryptocurrencies have risen in value, and crypto companies with names like DogAI and CryptoGPT are trying to incorporate the buzzing technology into their offerings.

No crypto firm is under more pressure than exchange giant Binance, which is facing government investigations on multiple fronts, as well as growing concerns over its financial stability and lack of cooperation with regulators. This month, the general manager of the exchange, Changpeng Zhao, decided to associate Binance with a more attractive trend. He unveiled Bicasso, a product that uses AI technology to create works of art in the form of non-fungible tokens, the digital collectibles known as NFTs.

“You can turn your creative visions into NFTs with AI,” Zhao wrote on Twitter. “Try it and show me what you do with it.”

In recent months, he and other industry figures have also posted social media videos seemingly designed to part ways with former crypto heroes like Bankman-Fried.

“Honor is not given,” Zhao said grimly in a message. “It is deserved.” In another widely shared video, Jesse Powell, the founder of crypto exchange Kraken, threw a few clumsy punches at a punching bag labeled “corruption” and “shady gamblers.”

A similar distancing effort was underway in March at ETH Denver, a conference for advocates of ethereum, the popular crypto platform. In the bathrooms, guests had the option of using toilet paper with a Bankman-Fried Che Guevara-style image. During the opening event, Jonathan Mann, a songwriter specializing in crypto-themed lyrics, performed a heavy and expansive anthem denouncing the crypto villains of 2022.

“It was meant to be a final letting go of all that toxicity and bad vibes and feelings of 2022,” Mann said in an interview. “I asked everyone to do breathing exercises before: ‘Close your eyes. Inhale deeply, exhale deeply. We will purify ourselves.'”

Even in 2023, a crypto conference can still attract high profile guests. As Mann and four other singers performed, Colorado Governor Jared Polis watched from the sidelines. “He had a smile on his face,” Mann said. (A spokeswoman for the governor, Melissa Dworkin, said she “would not misinterpret his inquisitive behavior as an endorsement of the words used.”)

For some crypto executives, ritualized cleansing is not enough. A few startups have completely ditched crypto in favor of different types of technology.

In late 2021, Troy Osinoff co-founded Zurp, hoping to simplify complex crypto investments for mainstream consumers. Zurp raised $5 million, built a waitlist of 120,000 people, and was preparing to launch last summer when the collapse of popular cryptocurrency Luna triggered a broader market meltdown.

The fallout damaged many of Zurp’s competitors, and Osinoff decided to put the rollout on hold because he was concerned that crypto markets weren’t a safe place to park customer funds.

Soon, Zurp switched to a more conventional form of fintech. The company has started developing a credit card with benefits tailored to Gen Z and plans to roll it out in the coming months. Osinoff said he still hopes to integrate encryption features into Zurp’s offerings, but only once sentiment improves.

“It’s already a barrier to getting people interested in crypto,” he said. “We’re just waiting for it to normalize.”