- Crypto mom Hester Peirce said that bear markets like this are the right way to punish over-leveraged players.
- FTX Chairman Sam Bankman-Fried has extended $250 million capital help to BlockFi as a bailout during the testing times.
SEC Commissioner Hester Peirce, popular as “crypto mon” for her pro-crypto views, has recently shared her view on the bailouts of the crypto firms. Crypto lending platforms have been in dire shape in this bear market and facing a major liquidity crunch.
Speaking to Forbes, Commissioner Peirce said that bailing them out is not the right thing to do! “Let these things play out,” she said, in order to emerge as a more sustainable crypto industry. Peirce’s latest comments came after FTX chief Sam Bankman-Fried announced a $250 million capital injection in crypto lending platform BlockFi.
Despite her pro-crypto stand, Hester Peirce believes that the bear market is the right way to punish the overleveraged and thus reset the health of the market. In her interview with Forbes, she said:
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.
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. But even if we did, I would not want to use that authority, we really need to let these things play out.
The recent comments from the SEC Commissioner come following major insolvencies in the crypto space. The Terra collapse and the liquidity crisis of Celsius Network have been dark moments for crypto.
FTX comes to BlockFi’s rescue
With enough cash on his hands, Sam-Bankman Fried, chairman of crypto exchange FTX, announced a $250 million bailout for crypto lending platform BlockFi. The FTX chief said that the funds will help BlockFi navigate the current crisis from a position of strength. In his announcement SBF stated:
BlockFi has careful risk management and great leadership. So they successfully removed at-risk counterparties preemptively. BlockFi customer assets are appropriately managed, with no debt/risk from 3AC, Celsius, etc.
BlockFi is financially strong; all operations are normal, as they always have been, and assets are safe. And, going forward, we’re excited to partner with BlockFi to offer industry leading products. We take our duty seriously to protect the digital asset ecosystem and its customers.
This is not the first time that SBF has been bailing out a troubled crypto firm. Two weeks back, his other firm Alameda Research blended a 200 million USDC loan to Voyager Digital. It also extended a revolving credit line of 15,000 Bitcoins worth nearly $450 million.
Last Sunday, SBF told NPR that he and his companies have done this a number of times in the past. During her interview, Peirce also said that the downturn is a learning lesson for all market participants and regulators. “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,” she added.