Changpeng Zhao: Binance will help "good" crypto projects survive the crisis

As one of the industry's leading players, Binance has an "obligation" to protect users and help others survive.industry participants. However, there are "bad projects" that should not be saved, said the head of the exchange, Changpeng Zhao.

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

On June 19, a similar opinion was expressed by the headFTX cryptocurrency exchange Sam Bankman-Fried. Speaking to National Public Radio, he said that his company "must intervene, even at a loss" to stop the "infection" of the industry.

Zhao noted that some companies and productspoorly designed, poorly managed and operated with errors. According to him, these projects will be replaced by more successful ones, and therefore there is no need to save them. 

“In short, these are simply “bad” projects.They shouldn't be saved. Unfortunately, some of them have large numbers of users, partially acquired through inflated incentives of “creative” marketing or pure Ponzi schemes,” he added.

Previously Commissioner of the Securities and Exchange CommissionHester Pierce said to US exchanges that participants in the cryptocurrency industry should not support projects that find themselves in a difficult situation due to negative phenomena in the market. She explained that this only harms the industry. 

According to Zhao, the best protection for users— education. He believes that industry participants and government organizations need to launch initiatives aimed at improving the financial literacy of the population. 

The head of Binance emphasized that there are many problematic projects in the industry, but the shortcomings of some of them can be corrected. According to him, such players “can be taken on bail.” 

He added that the same goes for products that are “barely surviving but have potential.” 

Zhao also touched on the topic of leverage in the cryptocurrency industry. He noted that due to the influence of the latter, the crisis in the industry has not yet been resolved.

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

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

To the second, Zhao ranked the credit positions of large industry participants like funds and DeFi protocols.

“When one of them is eliminated, the victimsIt usually takes days or weeks for creditors to recognize and accept the pain. This also has a cascading effect, but the rate at which it spreads is much slower. I believe that we have not yet seen the end of these problems,” — he wrote.

Recall that in June 2022, Zhao said that the crypto winter is the right time to hire new employees and further develop the business through various acquisitions.

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