Crypto wants its shine back

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

The chorus was a list of crypto’s most notorious villains, from trash-talking entrepreneur Do Kwon to disgraced FTX founder Sam Bankman-Fried, punctuated by four-letter words.

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

After a disastrous 2022, when a procession of prominent crypto firms imploded, the industry is searching for a bold rebrand. Leaders like Mr. Kwon and Mr. Bankman-Fried — once beloved crypto celebrities, with hundreds of thousands of devotees hanging on their every tweet — are now personae non gratae. Their former admirers argue that these crypto villains never truly embodied the industry’s core values, even before their companies collapsed.

At surviving firms, top managers are looking for new ways to market products that many consumers now distrust – and distance yourself from former colleagues and mentors who could face years in prison. Some companies are trying to capitalize on the growing interest around artificial intelligence, with crypto schemes that have intricate AI connections. Others are looking to replace the word “crypto,” arguing that the industry’s original nomenclature has become irredeemably tainted.

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

The cleaning work is a well-known routine in an industry that has experienced repeated upswings during its short history. Early proponents of Bitcoin had to convince the public and regulators that cryptocurrency was more than just a convenient tool for drug dealers. 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 turn the industry’s fortunes around. Since FTX’s demise, US regulators have announced fines and other enforcement actions against several major crypto companies. The abrupt failures of two trusted banking partners, Silvergate Capital and Signature Bank, have dealt another 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 one-time supervisor at the Federal Reserve Bank of New York who now teaches at Duke Law School. “What is this good for? What problem does it solve? This is just PR”

A year ago, the crypto industry was awash in cash. At his compound in the Bahamas in April, Mr. Bankman-Fried hosted a weeklong conference where attendees downed champagne and partied on the beaches. Among the guests: Su Zhu, a founder of crypto hedge fund Three Arrows Capital, which failed a few weeks later when a market crash sent all the major cryptocurrencies into freefall.

Now Mr. Bankman-Fried faces charges for his management of FTX that could mean decades in prison if convicted, and industry executives are still navigating the fallout.

Steven Saxton took a call with a bank this year to discuss his crypto startup, Gorilla Labs, which plans to offer a stablecoin, a type of cryptocurrency designed to maintain a value of $1.

“My CTO said crypto about five times during the call. I was like, ‘Just say ‘blockchain,'” Mr. Saxton said. “These guys can be very sensitive about that, and it can 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 dropped the term “crypto” from their marketing materials, turning to vague words like “decentralization.”

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

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

No crypto company is under more pressure than exchange giant Binance, which is facing government investigations on multiple fronts, as well as growing concerns about its financial stability and lack of cooperation with regulators. This month, the exchange’s CEO, Changpeng Zhao, moved 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 make with it.”

In recent months, he and other industry figures have also posted videos on social media apparently designed to distinguish themselves from former crypto heroes such as Mr. Bankman-Fried.

“Honor is not given,” Mr. Zhao grimly declared in one post. “It’s deserved.” In another much shared videoJesse Powell, the founder of the Kraken crypto exchange, threw some hard punches at a punching bag labeled “corruption” and “shady players.”

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 Che Guevara-style image of Mr. Bankman-Fried. At the opening event, Jonathan Mann, a songwriter who specializes in crypto-themed lyrics, performed an explosive anthem denouncing 2022’s crypto villains.

“It was meant to be a final release of all this toxicity and bad vibes and feelings from 2022,” Mr. Mann said in an interview. “I had everyone do breathing exercises before: ‘Close your eyes. Take a deep breath, take a deep breath. We’re going to cleanse.'”

Even in 2023, a crypto conference can still attract talented guests. As Mr. Mann and four other singers performed, the governor of Colorado, Jared Polis, watched from the sidelines. “He had a grin on his face,” Mr. Mann said. (A spokeswoman for the governor, Melissa Dworkin, said she “would not misconstrue his curious demeanor as an endorsement of the words used.”)

For some crypto leaders, ritualized cleansing is not enough. A few start-ups have abandoned crypto entirely in favor of different types of technology.

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

The fallout hurt many of Zurp’s competitors, and Mr. Osinoff decided to pause the rollout because he was concerned that the crypto markets were not a safe place to park client funds.

Zurp soon transitioned to a more conventional form of financial technology. The company began developing a credit card that has benefits tailored to Generation Z and plans to offer it in the coming months. Mr. Osinoff said he still hoped to incorporate crypto features into Zurp’s offering, but only once sentiment improved.

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

Susan C. Beachy contributed research.