SEC commissioner criticises crypto bailouts

“We really need to let these things play out,” said the SEC’s Hester Peirce

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Should the SEC step in to save struggling crypto firms? – Photo: Shutterstock
                                

The US Securities and Exchange Commission (SEC)’s most pro-crypto commissioner, Hester Peirce, has voiced her opposition to bailing out cryptocurrency companies as the once-burgeoning sector reels from recent sell-offs. 

Peirce’s remarks

Peirce told Forbes: “Crypto does not have a bailout mechanism. And that’s been perceived as one of the strengths of that marketplace. 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 not want to use that authority. We really need to let these things play out.”

With the total cryptocurrency market having lost $1.3trn (£1trn) since the start of the year, leading companies have trimmed their sales.

The US exchange Coinbase fired 18% of its staff, with the likes of Crypto.com and Gemini also announcing lay-offs.

Hedge funds and lenders

Cryptocurrency hedge funds and lenders have experienced even more dramatic consequences of the market’s decline. 

Last week, the Wall Street Journal reported that Three Arrows Capital had hired legal and financial advisers to come up with a solution for lenders and investors after suffering substantial losses. 

Asset sales or bailouts were among the options under consideration by the cryptocurrency hedge fund, which once had $10bn in assets under management. 

Celsius, the prominent cryptocurrency lender that froze withdrawals this month, is also reportedly facing insolvency with the onset of the so-called ‘crypto winter’. The company has received buyout offers from rivals Nexo and Chainge as a result. 

Optimism for the future

Addressing the phenomenon of cryptocurrency lenders who promise investors double-digit returns, Peirce said: “When you have an attractive return, you need to be asking questions about its associated risks. And if you’re not getting answers, then you need to think about whether you want to make that investment.”

Despite recent events, the most pro-cryptocurrency figure within the SEC’s leadership continues to be optimistic, stating: “It is helpful for us to see the points of connection. It’s a moment not only for market participants to learn, but also for regulators to learn, so that we can have a better sense of how the market operates.”

Further reading

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