'Crypto Mom' Poo-Poo's Bailouts for Anyone in the Crypto Industry
She adopts the attitude: actually better to “let these things play out" [Ehrlich, S. SEC Commissioner Does Not Support Crypto Bailouts, Says Market Crash Reveals True Innovators. (Accessed June 22, 2022)].
Securities and Exchange Commission (SEC) commissioner Hester Peirce (the most pro-crypto Commissioner for the U.S. SEC) believes that although the recent crypto crash is painful, it is having the effect of separating the stronger companies/projects from the weak. Specifically, she stated:
When things are a bit harder in the market, you discover who's actually building something that might last for the long, longer term and what is going to pass away.
[Ng, F. SEC’s Hester Peirce opposes crypto bailouts — SBF didn’t get the memo. (Accessed June 22, 2022)].
"Peirce made it clear that she does not support bailouts for anyone in the industry. Noting that the SEC is not charged by congress with being a systemic risk regulator, Peirce said that she would not support the use of bailouts to save crypto companies anyway. Especially not companies that eschewed mainstream risk management principles, became over-leveraged, and played right up to the edge" [Ehrlich, supra]. Peirce stated:
'Crypto does not have a bailout mechanism. And that’s been perceived as one of the strengths of that marketplace. 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'.
[Id].
Peirce's comments are being made whilst the crypto industry is experiencing multiple insolvencies, massive lay-offs, hiring freezes, and a deepening 'crypto winter'.
Despite Peirce's position, Sam Bankman-Fried, founder of FTX and Alameda Research, has taken the opposite approach and has actively been stepping in to provide relief to companies struggling due to the recent crypto crash. By way of example, yesterday, June 21, 2022, Fried, via Twitter announced a $250 million revolving credit facility for BlockFi [See, Jha, P. Crypto exchange BlockFi secures $250M credit from FTX amid bear market. (Accessed June 22, 2022)]. On Twitter, Fried noted:
.png)
In an interview with NPR this past Sunday, Bankman-Fried stressed:
'I do feel like we have a responsibility to seriously consider stepping in, even if it is at a loss to ourselves, to stem contagion,' he said. 'Even if we weren't the ones who caused it, or weren't involved in it. I think that's what's healthy for the ecosystem, and I want to do what can help it grow and thrive'.
[Gura, D. Crypto billionaire says Fed is driving current downturn. (Accessed June 22, 2022)
"Sam Bankman-Fried is the new John Pierpont Morgan -- he is bailing out cryptocurrency markets the way the original J.P. Morgan did after the crisis of 1907', Anthony Scaramucci, founder of SkyBridge Capital, said in an interview, referring to that year’s banking panic, which led to the creation of the Federal Reserve System".
[Yang, Y. Crypto Billionaire Sam Bankman-Fried Doles Out Credit Lines to Stem Contagion. (Accessed June 22, 2022)].
So, while Bankman-Fried is taking an active role in rescuing failing crypto companies in these hard times, 'Crypto Mom' believes:
It can also be a valuable learning opportunity for market participants and the regulator to see how the crypto market functions during times of acute stress. 'It is helpful for us to see the points of connection. It's a moment, not only for market participants to learn, but it's also for regulators to learn, so that we can have a better sense of how the market operates'.
[Ehrlich, supra].
"Although painful, and Peirce made it clear that she does not make light of anyone’s suffering through the drawdown, she is correct in this assessment" [Id].
Posted Using LeoFinance Beta