Crypto May Have Its Own ‘Lender of Last Resort’

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The richest crypto billionaire, Sam Bankman-Fried, is stepping up to the crypto rescue, bailing out two faltering companies to the tune of nearly $750 million.

In a heartbeat, the CEO of cryptocurrency exchange FTX backed struggling crypto lending platform BlockFi with a $250 million line of credit on Tuesday (June 21), just days after its trading firm Alameda Research has offered $500 million in cash and cryptocurrencies to Voyager Digital, a crypto broker.

See also: Bankman-Fried bails out crypto broker Voyager, blames Fed for slowdown

The two are rumored to be facing difficulties after crypto lenders Celsius and Babel Financial halted withdrawals, and hedge fund Three Arrows Capital suffered forced liquidations and is facing insolvency. BlockFi was one of the companies that liquidated Three Arrows’ positions at a huge loss when it couldn’t meet margin calls.

Bankman-Fried is trying to ‘stem the contagion’ after the collapse of a $45 billion stablecoin sent financial shockwaves throughout the sector, as did inflation-fighting rate hikes by the Fed brought all the markets down, he told NPR on Sunday, June 19.

“I think we have a responsibility to seriously consider intervening, even if it’s at a loss to ourselves,” Bankman-Fried noted. “Even though we weren’t the ones who caused it, or weren’t involved in it. I think that’s what’s healthy for the ecosystem, and I want to do what I can to help it grow and thrive.

He’s apparently serious about the “loss to us” part, as the Financial Times (FT) reported Tuesday, June 21 that “FTX’s claims on the facility would be contingent on all customer balances”, if BlockFi fails. .

This is not the first time that Bankman-Fried has intervened. Last August, FTX loaned $120 million to Japanese FinTech and cryptocurrency exchange Liquid Group after it fell victim to a $100 million hack. In February, FTX acquired the company on undisclosed terms.

“Sam has become a lender of last resort,” said Anatoly Crachilov, CEO of fund manager Nickel Digital Asset Management, the FT reported.

That’s not to say he’s giving loans to all comers – or that he’s not acting in his own best interest. For one, FTX was one of three exchanges that liquidated Three Arrows.

On the other hand, Crachilov noted, “if you have a few Lehman events at the same time, concentrated, it could impose crypto winter for a very long period of time. FTX has the balance sheet to support these companies, and it is in their long-term interest in seeing this ecosystem survive.

As visible as her hair

Crypto isn’t the only area where Bankman-Fried is focused on being a deep-pocketed savior. In May, he announced plans to spend $100 million to $1 billion to influence the outcome of the 2024 presidential election.

That’s distinct from his lobbying efforts in Washington, D.C., where his vast ball of hair has become an increasingly visible sight and influential presence as crypto ramps up its attempts to influence both Congress and government. Biden administration as they work to create a regulatory framework that will determine the future of the industry.

See more: Crypto Industry Lobby Surpasses Its Weight Class

Well, mostly separated. Despite his protests that 2024 campaign contributions — so far mostly focused on supporting Democrats — are not crypto-related, the nine-figure campaign donations are nearly unprecedented. This kind of checkbook puts just about anything that interests the donor at the forefront of many agendas.

More broadly, he also publicly stepped up his promotion of the industry, paying $135 million to put the FTX name on the NBA’s Miami Heat arena and shelling out $6.5 million for a Super Bowl ad.

Unlike other advertisers Coinbase and Crypto.com, FTX hasn’t announced any big job cuts over the past month.

Also Read: Super Bowl Curse Comes For Crypto As Layoffs Rise

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