One of the commissioners of the US Securities and Exchange Commission (SEC), Hester Pierce, recently spoke out against the crypto bailouts that have been seen in the crypto space. According to Pierce, the crypto industry should let things play out as it is in order to enhance its sustainability.
SEC Commissioner Against Bailouts
Pierce is known to be one of the most vocal of the SEC commissioners. She has previously been supportive of the developments in the crypto space and also talked about the crash in the crypto market in Forbes. According to the commissioner, as painful as the crash has been, it could actually be useful because it will help in distinguishing the strong projects from the weak.
The commissioner said that when things get difficult in the market, it is easier to identify what companies are actually doing something that might last in the long-run and what will not be able to pull through. The commissioner stated that bailing out weak projects was not a good idea because they had clearly not managed the risks.
She said that the fact that there is no model in the crypto space for bailouts is what makes it different and no one should step in to do it when they do not possess the authority in this aspect. She said that even those who have the authority should not step in because it is best to let these things play out.
Problems in the Crypto Space
The last few months have wreaked havoc in the cryptocurrency market. Most companies in the crypto space have suffered because of the bear market conditions. Those operating in the decentralized finance (DeFi) space, such as Babel Finance and Celsius Network, are few of the entities dealing with the impacts of the downturn. They recently announced that they were freezing withdrawals on their platform. Likewise, crypto exchanges, such as Coinbase, Gemini and Crypto.com announced that they would lay off their staff.
The chief executive of crypto exchange FTX, Sam Bankman-Fried decided to take a bold step for bailing out crypto companies that are dealing with the consequences of the crash in the market. The CEO announced on June 21stthat he would assist BlockFi, another crypto company laying off its employees, with a loan of $250 million.
The capital would help the credit firm in giving its balance sheet a boost and also promote growth. This news came days after Alameda Research announced that it was giving a loan worth 200 million USDC to Voyager Digital. Bankman-Fried is also one of the co-founders of the Alameda Research.
SkyBridge Capital’s founder, Anthony Scaramucci, stated that the FTX CEO was acting like John Pierpont Morgan who was using his own money and convincing others to do the same. But, he added that this current downturn in the crypto market could actually be considered a learning opportunity by regulators as well as market participants because it would highlight the weaknesses that need to be addressed in the long run.