Binance: For Changpeng Zhao, we must let companies and crypto disappear to let the best take their place | Binance, Changpeng Zhao

Binance CEO Changpeng Zhao acknowledged the company’s responsibility to help the industry survive and thrive, but pointed out that some “bad“Companies should nevertheless be left in the lurch.

Binance CEO Changpeng Zhao criticized the practice of extending bailouts to struggling cryptocurrency companies. Zhao also criticized the excessive leverage seen across the industry. The statement follows reports that rivals FTX and Alameda Research have recently extended credit to struggling crypto companies.

Changpeng Zhao, released a note summarizing his opinion on bailouts and leverage in the crypto industry. His comments come just days after reports of rival crypto exchange FTX bailing out several major struggling crypto firms began circulating in the media.

“Bailouts don’t make sense here.”

Changpeng Zhao expressed his views on bailouts and the consequences of excessive leverage percolating through the sector.

In a memo published Thursday, CZ wrote that poorly designed, poorly managed and poorly operated businesses should not be rescued. “Bailouts here don’t make senses,” he explained, emphasizing that the industry should not perpetuate “bad” businesses, but rather let them fail and allow better ones to take their place.

CZ also pointed out that the question is not binary and that “not all bailouts are the same“. Bailouts, he said, could remain a viable option for companies with a strong business model and a product fit for the market, but which have made fixable errors, such as aggressive spending and insufficient reserves. “These companies can be bailed out and then make sure changes are made to address the issues that got them there in the first place.“, he wrote.

Zhao’s comments come days after reports that FTX and Alameda Research have extended lines of credit to crypto lender BlockFi and crypto broker Voyager Digital. Both companies have been engulfed in serious insolvency issues after a wave of liquidations swept through the industry, including the potential bankruptcies of crypto lender Celsius and crypto hedge fund Three Arrows Capital. Commenting on the injection of $250 million of credit into BlockFi, Sam Bankman-Fried, CEO of FTX, said: “We take our duty seriously to protect the digital asset ecosystem and its customers.

Zhao also acknowledged Binance’s responsibility to protect users and help industry players survive and thrive, even at its own expense. However, despite the numerous projects reportedly approaching Binance to engage and discuss, the exchange is not known to have bailed out or extended a line of credit to any of them.

Zhao, who was once among the richest people in the world, concluded the note by saying that the crypto industry has shown tremendous resilience and stakeholders should take advantage of the current situation. for “reiterate proper risk management and educate the masses.

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