Binance CEO CZ Emphasized That Some Crypto Projects Shouldn’t Be Saved
Bailouts and the effects of the industry’s excessive leverage have been addressed by Changpeng Zhao.
The CEO of the biggest cryptocurrency exchange in the world said on Thursday that companies with weak product designs, poor management, and poor operations shouldn’t be rescued.
He emphasized that the industry shouldn’t support “bad” firms by giving them bailouts, but rather by letting them fail and allowing stronger ones to take their place. “Bailouts here don’t make sense,” he said.
Furthermore, Zhao emphasized that “not all bailouts are the same” and that the problem isn’t black-and-white. He asserted that firms with strong business models and product-market fit who may have made minor, correctable errors like excessive spending and maintaining insufficient reserves should still consider bailouts as a viable option.
“These can be bailed out and subsequently ensure changes are made to fix the problems that led them to this situation in the first place,” he wrote.
CZ’s comments come days after revelations that BlockFi and Voyager Digital had received credit lines from rival exchange FTX and its connected main major trading business Alameda Research. Following a wave of liquidations that resonated across the industry, including the possible bankruptcy faced by cryptocurrency lenders Celsius and Three Arrows Capital, both companies became embroiled in major insolvency troubles.
Sam Bankman-Fried, CEO of FTX, said in response to the $250 million credit infusion into BlockFi, “We take our duty to protect the digital asset ecosystem and its customers seriously.”
CZ acknowledged Binance’s obligation to safeguard users and support industry participants’ survival and success in today’s letter on bailouts, even at its own price. The exchange is not known to have bailed out or given any projects a credit line, despite the fact that several of them are said to have approached Binance to engage and discuss.
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