Binance CEO Changpeng Zhao acknowledged the company’s responsibility to help the industry survive and thrive, but pointed out that some “bad“Businesses should still be abandoned.
Binance CEO Changpeng Zhao criticized the practice of extending bailouts to struggling cryptocurrency companies. Zhao also criticized the excessive leverage found in the industry. The statement follows reports that rivals FTX and Alameda Research recently extended credit to ailing crypto firms.
Changpeng Zhao, released a note summarizing his opinion on bailouts and leverage in the cryptocurrency industry. Her comments come just days after news about rival cryptocurrency exchange FTX saving several major struggling cryptocurrency companies began to circulate in the media.
“Bailouts don’t make sense here.”
Changpeng Zhao expressed his views on the bailouts and the consequences of excessive leverage seeping through the industry.
In a note released Thursday, CZ wrote that poorly designed, poorly managed and poorly managed businesses should not be bailed out. “The bailouts make no sense heres, “he explained, stressing that the industry should not perpetuate”badBusinesses, but rather let them fail and allow the best ones to take their place.
CZ also stressed that the demand is not binary and that “not all bailouts are created equal“. Bailouts, she said, could remain a viable option for companies with a strong business model and market-friendly product, but which have made solvable mistakes, such as aggressive spending and insufficient reserves. “These companies can be bailed out and then make sure that changes are made to address the issues that brought them there in the first place.“, he wrote.
Zhao’s comments come days after FTX and Alameda Research extended credit lines to cryptocurrency lender BlockFi and cryptocurrency broker Voyager Digital. Both companies were engulfed in serious insolvency problems after a wave of liquidations hit the industry, including potential bankruptcies of cryptocurrency lender Celsius and cryptocurrency hedge fund Three Arrows Capital. Commenting on the injection of $ 250 million of credit into BlockFi, FTX CEO Sam Bankman-Fried said: “We take our duty to protect the digital asset ecosystem and its customers seriously.“
Zhao also recognized Binance’s responsibility to protect users and help industry players survive and thrive, even at their own expense. However, despite the numerous projects rumored to come close to Binance to get involved and discussed, the exchange is not known to have saved or extended a credit line to any of them.
Zhao, who was once among the richest people in the world, concluded the note by saying that the cryptocurrency industry has shown tremendous resilience and stakeholders should take advantage of the current situation.reaffirm proper risk management and educate the masses.“