Crypto Biz: A Historic Year for Bitcoin and Key Industry Developments

The cryptocurrency world has experienced a momentous 2024, with Bitcoin reaching new heights and significant shifts in regulation, institutional involvement, and industry offerings. This week’s Crypto Biz explores Bitcoin’s landmark year, Crypto.com’s expansion, Russia’s partial ban on crypto mining, and the U.S. tax stance on staking rewards.

Bitcoin: A Record-Breaking Year

Bitcoin (BTC) has marked nearly 16 years since its network debut, and 2024 has proven to be a historic year for the digital asset. In January, Bitcoin’s status as a mainstream financial instrument was solidified with the approval of 11 exchange-traded funds (ETFs). The ETFs, which sparked one of the most successful debuts in financial history, drew massive institutional demand, resulting in Bitcoin-focused funds attracting over $113.5 billion by year-end.

The ETF launch helped push Bitcoin’s price to record highs, reaching $100,000 in December—a surge largely driven by professional investors. This influx of institutional capital also impacted the broader market, particularly over-the-counter (OTC) markets, where institutional trading volume soared. Kraken exchange, for instance, reported a 220% year-over-year increase in its OTC transactions. "Long story short, OTC is going gangbusters right now," said Tim Ogilvie, Kraken's head of institutional services.

By the end of 2024, institutional adoption of Bitcoin had moved beyond ETFs, with publicly traded companies embracing Bitcoin as part of their balance sheets. MicroStrategy, a leader in this strategy, has amassed over 444,000 BTC since 2020. On December 23, the company filed a proxy with the U.S. Securities and Exchange Commission (SEC) to seek shareholder approval for further Bitcoin purchases through 2025. While critics argue that Bitcoin’s institutional adoption diverges from its original ethos of decentralization, the cryptocurrency continues to operate as a decentralized network, enabling individuals worldwide to store and transfer wealth.

MicroStrategy Pushes for More Bitcoin Purchases

MicroStrategy has called for a special shareholders’ meeting to approve an expanded equity-issuance plan aimed at funding additional Bitcoin acquisitions. The company plans to raise capital through equity sales and fixed-income securities to fund its ambitious goal of purchasing an additional $42 billion worth of Bitcoin over the next three years. As of December 24, MicroStrategy had already accumulated over 444,000 BTC. This bold strategy has significantly boosted MicroStrategy's stock, which has surged over 420% in 2024, driven largely by its Bitcoin holdings.

Crypto.com Expands with New Custody Service

In another significant development, Crypto.com has launched a new institutional cryptocurrency custody service in the U.S. The Crypto.com Custody Trust Company is designed to offer secure custody solutions for U.S. institutions and high-net-worth individuals. As part of its broader expansion efforts, Crypto.com aims to strengthen its presence in North America, with a particular focus on the U.S. and Canada. The launch of this service reflects the company’s ambition to meet growing demand for institutional-grade crypto solutions. In December, Crypto.com’s CEO, Kris Marszalek, met with U.S. President-elect Donald Trump at his Mar-a-Lago estate to discuss cryptocurrency policies, further signaling the company’s commitment to engaging with U.S. regulators.

Russia Imposes Partial Ban on Crypto Mining

On the global regulatory front, Russia has taken a significant step by implementing a partial ban on cryptocurrency mining. Starting January 1, 2025, and lasting until March 2031, crypto mining will be prohibited in 10 regions, including Dagestan, Chechnya, and parts of Donetsk. Seasonal restrictions will also be applied in regions such as Irkutsk, Buryatia, and Zabaikalsky to prevent energy shortages, especially during the winter months (November to March). These moves come in response to growing concerns about energy consumption, with the government seeking to balance the growth of the crypto industry with the need for reliable power supply. However, some key mining regions like Irkutsk will face only partial restrictions rather than full bans, reflecting a more nuanced approach to the issue.

U.S. IRS Reaffirms Tax Treatment of Staking Rewards

In the U.S., the Internal Revenue Service (IRS) has reaffirmed its stance on the taxation of cryptocurrency staking rewards. In a recent ruling, the IRS rejected arguments in a lawsuit filed by Joshua and Jessica Jarrett, who sought to have their staking rewards treated as property and taxed only upon sale. The IRS insists that staking rewards are taxable upon receipt at their fair market value, marking a significant precedent for how staking rewards will be taxed in the U.S.

The case, which centers around rewards earned from staking Tezos tokens, is part of a broader legal challenge initiated by the Jarretts in 2021. The ruling reaffirms the IRS's approach that staking rewards are considered taxable income at the time they are received, rather than when they are sold or exchanged. This decision could have significant implications for how staking rewards are reported and taxed by U.S. taxpayers in the future.

Looking Ahead

As 2024 draws to a close, the cryptocurrency landscape has undergone remarkable transformations. Bitcoin has solidified its place in the financial mainstream, fueled by institutional adoption and increasing demand. The launch of new services like Crypto.com’s custody offering and regulatory shifts in countries like Russia highlight the ongoing evolution of the global crypto market. Meanwhile, U.S. tax policy on staking rewards continues to shape the way investors approach crypto assets.

The coming years will likely see continued innovation and regulatory scrutiny as the industry matures and adapts to emerging technologies, such as quantum computing. 2024 was certainly a milestone year for crypto, but the journey is far from over.