SEC Commissioner Hester Peirce Doesn’t Support Crypto Bailouts After FTX Chairman Backs BlockFi
Amid the brutal correction in the crypto space over the last two months, crypto firms, especially lenders, are running dry of liquidity. A day after FTX chairman Sam Bankman-Fried announced that they will offer a $250million support for BlockFi, crypto-friendly SEC commissioner Hester Peirce said that she doesn’t support the bailout.
Commissioner Peirce, also popular as “crypto mom”, spoke during her interview with Forbes. In their interview she said: “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 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.”
Peirce further added that the recent crash in crypto, though pain, is separating strong companies from the weak ones. “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,” she added.
In addition to its, Hester Peirce also said that the recent market downturn is a learning opportunity to investors and regulators alike. “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 said.
Since the collapse of the Terra ecosystem, the broader crypto market has been in a dire situation. Crypto lending platforms such as BlockFi and hedge-fund giant Three Arrows Capital (3AC) have been facing insolvency after facing hundreds of millions in liquidations amid the ETH price collapse.
On Tuesday, June 21, FTX Chairman Sam Bankman-Fried announced injecting $250 million into troubled crypto lending platform BlockFi. The FTX chief said that the funds will help BlockFi to navigate through this bear market with a position of strength.
He further added: “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”.
The recent funds might help BlockFi build up its books once again. However, the recent turn of events in the crypto space invite more regulatory scrutiny.