Binance founder CZ: 'Bad' crypto projects shouldn't be bailed out

Binance founder and CEO Changpeng Zhao believes that "bad" crypto projects should be allowed to fail rather than being bailed out by crypto companies with healthy cash reserves.

In a blog post on June 23, CZ said that companies that are poorly run, mismanaged, or release poorly designed products should not be bailed out but allowed to collapse:

"In short, they are just 'bad' projects. These should not be rescued. Sadly, some 'bad' projects have large numbers of users, usually through exaggerated incentives, 'creative marketing' or pure Ponzi scam' obtained."

“Also, in any industry, there are always more projects that fail than succeed. Hope that fails and succeeds. But you get my drift. Bailouts don’t make sense here,” he added.

This follows a recent move by cryptocurrency billionaire Sam Bankman Fried and his firm Alameda Research to help the cryptocurrency industry by providing a revolving loan of 350 million USDC and 15,250 Bitcoin (worth $464.48 million as of this writing). Companies and projects that have had liquidity issues recently, such as Voyager Digital.

However, CZ went on to note that Binance may seek to support some underfunded companies that either have “problems that can be fixed” or “are barely surviving but have a lot of potential.”

“Many projects come to us, wanting to engage and talk. Again, in real life, the categories are not clear labels. All projects see themselves as a third category, and we need to look at each project carefully to decide. There's a certain subjectivity in it," he said.

Many companies are facing liquidity issues due to the current bear market, while others, such as Three Arrows Capital and Celsius, are struggling with investments in companies and projects that may go bankrupt.

The Binance CEO’s comments echoed similar sentiments on Tuesday from U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce, who was entirely opposed to bailing out crypto projects.

In a June 21 interview with Forbes, the crypto-friendly commissioner known as "Crypto Mom" argued that rather than bailing out struggling companies, it would be better to "let these things run their course" and create a more sustainable industry .

“When the market conditions get tougher, you’ll find out who’s really building what’s likely to last in the long term and what’s going to die,” she said.

Centralized Binance

In an interview with Bloomberg Businessweek on June 23, CZ stated that his company’s mission is to support autonomous blockchain-based projects that can operate without a centralized authority or leader, not Traditional centralized model.

The CEO also referred to his company as an "organization" and his employees as "team members" that are part of a decentralized mission.

However, the report cites comments from a purportedly anonymous former Binance employee, stating that the company may not be as decentralized as claimed and that CZ has sole authority over the company and its business decisions.

“Ultimately, he was the holding company,” said one former employee.

Given that CZ has never explicitly stated that Binance is a decentralized company, despite his advocacy of the concept, the angle of the Bloomberg article may need to be taken with a grain of salt. While Binance Smart Chain does claim to be a decentralized ecosystem, it has drawn criticism for its lack of such an ecosystem in the past.

While CZ this week took aim at the mismanaged company, Binance's management structure has also been called into question.