Hester Peirce Warns Against Crypto Firms Bailouts, Gives Reasons

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by Mayowa Adebajo · 2 min read
Hester Peirce Warns Against Crypto Firms Bailouts, Gives Reasons
Photo: Fortune Brainstorm TECH / Flickr

Commissioner Hester Peirce believes that market downturns present the perfect opportunity for all to learn how the market reacts in troubled times.

SEC commissioner Hester Peirce, also popularly known as ‘crypto mom’, has shared her view about crypto firms bailouts. According to her, bailouts might be doing more harm than good for the crypto industry.

For clarity, bailouts refer to the financial support that companies get when they run into financial trouble. During these times, the firms are usually on the brink of bankruptcy, and they depend on bailouts to survive.

Crypto Firms Bailouts Are Not Good for the Industry, Says Peirce

Speaking about the recent crypto crash, Peirce told Forbes that although painful, sometimes such occurrences are necessary for the industry to remain sustainable. She then added that allowing the situation to unfold will filter off the weak firms, and leave the strong ones. More like separating the wheat from the chaffs. She said:

“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.”

In her opinion, commissioner Pierce believes that in fact, there are crypto firms which mismanaged risk, getting did not properly analyze risks. And as a result, became over-leveraged in the process. Therefore, she believes that the best course of action might be inaction. That is, letting things play out naturally.

SBF Begs to Differ

Meanwhile, the CEO of crypto exchange FTX and Alameda Research, Sam Bankman-Fried has a differing opinion about crypto firms bailouts. The businessman has been on a bailout spree, helping crypto firms to stay afloat in this turbulent market period.

On Tuesday, SBF announced via his Twitter account that he will float $250 million to support the operations of BlockFi. However, that is the second such gesture in only a few days. Alameda Research had earlier promised to also support Voyager Digital. That is, however, in the case that Voyager Digital needs help to secure its customer asset.

Meanwhile, Bankman-Fried has explained that his company is only doing this to curb a possible contagion when crypto firms begin to fall.  Nonetheless, Peirce believes that this is a good opportunity to properly understand how the market reacts in times like this.

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Mayowa Adebajo

Mayowa is a crypto enthusiast/writer whose conversational character is quite evident in his style of writing. He strongly believes in the potential of digital assets and takes every opportunity to reiterate this. He's a reader, a researcher, an astute speaker, and also a budding entrepreneur. Away from crypto however, Mayowa's fancied distractions include soccer or discussing world politics.

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