SEC Commissioner Hester Peirce Opposes Cryptocurrency Bailout

U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce has spoken out against bailouts of cryptocurrency companies, arguing that it’s actually better to “let these things go” to create a more sustainable industry.

The SEC’s most pro-cryptocurrency commissioner, Peirce, told Forbes that the recent cryptocurrency crash, while painful, is separating the strong from the weak.

“When the market conditions get tougher, you start to see who’s really building something that might last long term and what’s going to go away,” she said.

The commissioner made it clear that she does not support bailouts for anyone in the cryptocurrency industry, especially those who have mismanaged risk and overleveraged.

“Cryptocurrencies don’t have a bailout mechanism [...]. I don’t want to come in and say, while we don’t have power, we’re going to find a way to bail you out. But even if we did, I don’t want to use that power, we Really need to keep these things going."

The SEC commissioner's comments come amid a string of bankruptcies, layoffs and hiring freezes in the crypto market.

Save the Crypto Whales

Sam Bankman-Fried, the founder of FTX and Alameda Research, has taken a different approach and has been stepping in to rescue cryptocurrency firms struggling from the market crash.

On Tuesday, Bankman-Fried informed his 706,900 Twitter followers that he and FTX would inject $250 million into BlockFi via a revolving credit facility to improve its balance sheet and strengthen the platform.

Just days ago, Alameda Research agreed to provide Voyager Digital with a $200 million loan and a 15,000 Bitcoin (BTC) “revolving line of credit,” worth $446.3 million at current prices, to “protect client assets as necessary.” .

Bankman-Fried told NPR on Sunday that this is something he and his firm have done "many times in the past" to "stop the contagion" in a string of failed crypto companies.

In an interview with Bloomberg on Wednesday, SkyBridge Capital founder Anthony Scaramucci referred to the FTX chief executive as "John Pierpont Morgan," the Wall Street tycoon who pledged his own money during the 1907 Bankers' Panic. funds, and persuade others to do the same, in order to shore up the banking system.

“He’s bailing out the cryptocurrency market like the original JPMorgan Chase did after the 1907 crisis.”

However, Peirce believes the downturn could be a valuable learning opportunity for market participants and regulators alike about how markets behave in times of stress.

“It helps us see the dots of connection. This is a learning moment not only for market participants but also for regulators so we can better understand how markets work.”

The market turmoil has severely impacted lending platform Celsius Network and cryptocurrency-focused hedge fund Three Arrows Capital (3AC), which faces bankruptcy after liquidating roughly hundreds of millions of dollars as ethereum’s price continued to plummet.