Changpeng Zhao: Binance will help ‘good’ crypto projects weather the crisis

As one of the industry’s leading players, Binance is “obliged” to protect users and help other market participants survive. However there are ‘bad’ projects that should not be saved, заявил the head of the exchange Changpeng Zhao.

“As you know, current market conditions are difficult. Since we are one of the largest players in the industry with healthy cash reserves, we are obliged to protect users. We also have a duty to help industry players survive and thrive. This is true even if there is no direct benefit to us and we face negative ROI.”

On June 19, a similar view was voiced by FTX founder Sam Bankman-Fried. Appearing on National Public Radio, he said his company “must intervene, even if that costs it,” to stop the contagion spreading through the industry.

Zhao noted that some companies and products are poorly designed, ill-managed and plagued by bad incentives. He said that these projects will be replaced by better ones, and that they do not deserve saving.

“In short, these are simply ‘bad’ projects. They should not be saved. Unfortunately, some of them have a large user base, partly acquired through inflated incentives of ‘creative’ marketing or outright Ponzi schemes,” he added.

Earlier, SEC Commissioner Hester Peirce said that participants in the crypto industry should not back projects that are in trouble due to negative market phenomena. She explained that this only harms the industry.

In Zhao’s view, the best protection for users is education. He believes that participants in the industry and government bodies should launch initiatives aimed at improving financial literacy among the population.

The Binance chief stressed that the industry has many problematic projects, but some of their flaws can be fixed. He said such players could be put under guardianship.

He added that this also applies to products that are “barely surviving, but have potential.”

Zhao also touched on leverage in the cryptocurrency industry. He noted that the impact of the latest crisis on the sector has not yet run its course.

“I think the key difference between the current bear market and the events of 2018 is that there is a lot of leverage in our industry right now,” the Binance chief explained.

According to him, leverage can be divided into two categories — fast and slow. The first includes margin positions on centralized exchanges, which are liquidated quickly in the event of market shocks.

To the second Zhao attributed the credit positions of major industry participants such as funds and DeFi protocols.

“When one of them is liquidated, affected lenders typically require several days or weeks to realise and come to terms with the pain. It also has a cascading effect, but the speed of its propagation is much slower. I believe we have not yet seen the end of these problems,” Zhao wrote.

Earlier in June 2022 Zhao said that the crypto winter is an appropriate time to hire new staff and grow the business through a range of acquisitions.

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