Sign Up on MEXCBreaking: Binance Refuses to Bailout Failed Crypto Projects
After cryptocurrency exchange FTX extended a helping hand to troubled crypto lender BlockFi and Voyager, there have been rumors that Binance might announce some bailouts too considering its healthy cash reserves. However, Binance has finally broken the silence and clarified the entire thing.
The company said that it is in no mood to support “bad” and failed crypto projects. This includes projects that are “poorly designed”, “poorly managed”, or “poorly operated”. In its latest blog post, Binance said that bailouts to such projects don’t make sense and they should not be protected.
“Don’t perpetuate bad companies. Let them fail. Let other better projects take their place, and they will,” it notes. Crypto lending firms have had a massive overleverage and were forced to liquidate during the recent market downfall.
But Binance explains another category of projects deserving a bailout. As per Binance, these are projects that made small mistakes. Explaining this project types, Binance notes:
They are either too aggressive on spending, have insufficient reserves, or have other minor fixable problems. These projects usually have some good qualities: product-market fit, generating revenue in normal market conditions, sound business models, decent teams, etc.
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.
SEC Commissioner Hester Peirce opposes Bailouts
Soon after FTX announced a $250 million liquidity injection to bailout BlockFi, the crypto-friendly SEC Commissioner voiced her opinion against it. She said that the recent market crash is a natural process of filtering the strong companies from the weak. Let things play out naturally. In her interview with Forbes, Peirce said:
“Crypto does not have a bailout mechanism […] I don’t want to come in and say that we’re going to try to figure out a way to bail you out if we don’t have the authority to do it. But even if we did, I would, I would not want to use that authority, we really need to let these things play out.”
Crypto mom Hester Peirce also said that the downturn could be a valuable learning opportunity for market participants and regulators.
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