Binance CEO Changpeng Zhao Criticizes Crypto Bailouts


Keys to take

  • Binance CEO Changpeng Zhao has criticized the practice of extending bailouts to failing cryptocurrency companies.
  • Zhao also intervened to criticize the excessive leverage observed throughout the industry.
  • The statement comes after news that rivals FTX and Alameda Research had recently extended credit to troubled cryptocurrency companies.

Share this article

Binance CEO Changpeng Zhao issued a note summarizing his view on the bailouts and the influence in the crypto industry. His comments come just days after reports began circulating in the media about rival cryptocurrency exchange FTX rescuing several large and distressed cryptocurrency companies.

“Rescues here don’t make sense”

Changpeng Zhao expressed his view on the bailouts and the consequences of the excessive leverage infiltrating the industry.

In one Note published on Thursday, the CEO of the world’s largest cryptocurrency exchange wrote that poorly designed, poorly managed and poorly operated companies should not be saved. “Rescues here don’t make sense,” he explained, stressing that the industry should not perpetuate “bad” companies, but rather let them fail and allow better ones to take their place.

Zhao also stressed that the issue is not binary and that “not all rescues are the same.” He argued that bailouts could remain a viable option for companies with strong business models and market fit for products that could make small correctable mistakes, such as spending aggressively and preserving insufficient reserves. “These can be rescued and subsequently ensure that changes are made to address the issues that led them to this situation in the first place,” he wrote.

Zhao’s comments come days after the reports that rival stock exchange FTX and leading trading affiliate Alameda Research had extended lines of credit to the cryptocurrency lender BlockFi and the Voyager Digital encryption broker. Both companies have been embroiled in serious insolvency problems after a wave of liquidations spread across the industry, including possible bankruptcies faced by cryptocurrency lender Celsius and cryptocurrency hedge fund Three Arrows Capital. Commenting on the $ 250 million credit injection into BlockFi, FTX CEO Sam Bankman-Fried said, “We take our duty to protect the digital asset ecosystem and its customers seriously.”

In today’s note on rescues, Zhao also acknowledged Binance’s responsibility to protect users and help industry players survive and thrive, even behind their backs. However, even though many projects allegedly approached Binance to participate and talk, it is not known whether the exchange rescued or extended a line of credit to any of them.

Zhao, who at one time ranked among the richest people in the world, concluded the note by saying that the crypto industry has shown enormous resilience and that stakeholders should take the current situation as an opportunity to “reiterate proper risk management and educate to the masses “. ”.

Disclosure: At the time of writing this article, the author of this piece owned ETH and several other cryptocurrencies.

Share this article



Source link

Leave a Comment

Your email address will not be published.