- Binance CEO Changpeng Zhao has criticized the practice of giving bailouts to failed crypto companies.
- Zhao criticized the excessive leverage seen across the industry.
- The statement comes after reports that rivals FTX and Alameda Research recently gave credit to struggling crypto companies.
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Binance CEO Changpeng Zhao has released a note summarizing his opinion on bailouts and leverage in the crypto industry. His remarks come just days after rival crypto exchange FTX reported several large and troubled crypto companies circulating in the media.
“Bailouts don’t make sense here”
Changpeng Zhao has expressed his opinion on the consequences of bailouts and excessive leverage in the industry.
one in Comment Published on Thursday, the CEO of the world’s largest crypto exchange wrote that companies with poor design, poor management and poor operations should not be spared. “There’s no point in a bailout here,” he explained, adding that the industry should not perpetuate “bad” companies, but instead let them fail and let better ones take their place.
Zhao also emphasized that the issue is not binary and that “not all bailouts are equal.” He argued that bailouts could remain a viable option for companies with sound business models and product-market fit, which may have made small, fixable mistakes such as spending aggressively and preserving insufficient reserves. “They can be bailed out and made sure to make changes later to fix the problems that led them to this situation,” he wrote.
Zhao’s comments come a few days later reports That rival exchange FTX and affiliated major trading firm Alameda Research had extended credit lines to the crypto lender BlockFi and crypto broker Voyager Digital. The two companies became embroiled in serious insolvency issues following a wave of liquidations across the industry, including potential bankruptcy being faced by cryptocurrency lender Celsius and crypto 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 very seriously.”
In today’s note on the bailout, Zhao also acknowledged Binance’s responsibility to protect users and help industry players survive and thrive, even at their own expense. However, despite several projects reportedly being involved and contacting Binance to talk, the exchange is not known to have bailed out or extended the line of credit for any of them.
Zhao, once one of the top wealthiest people in the world, concluded the note by saying that the crypto industry has shown tremendous resilience and urged stakeholders to “replicate proper risk management and educate the public” on the current situation. should be taken as an opportunity. ,
Disclosure: At the time of writing, the author of this article owns ETH and several other cryptocurrencies.