Zhao Changpeng: Banks continue to fall into a bankruptcy cycle, making it difficult for new banks to be allowed to participate in market competition

According to reports, Zhao Changpeng, CEO of Coin An, tweeted that every ten years or so, a group of banks will fail. “We bailed them out, and then they fell into a bankruptcy cycle again, and the cost of each failure was higher.”. At the same time, it is very difficult for new banks to be allowed to participate in market competition. New banks are also required to operate in exactly the same manner as bankrupt banks. This does not meet the definition of a free market. A user suggested that Zhao Changpeng buy an existing bank, which Zhao Changpeng said means that all legacy businesses must be handled.

Interpretation of this information:

The message discusses the cyclic nature of bank failures and the difficulties faced by new banks to participate in market competition. Zhao Changpeng, the CEO of Coin An, shared on Twitter how every ten years, a group of banks fail and are bailed out, but they end up falling into a bankruptcy cycle again, causing the cost of each failure to be higher. The cycle creates a non-free market environment, as new banks are required to operate in the same manner as bankrupt banks to participate in the market.

The message highlights a problem inherent in the banking industry’s cyclic nature. Banks fail and are bailed out, only to inevitably fall into a bankruptcy cycle again, creating a costly chain of events. This cycle challenges the viability of a free market as new banks could not operate independently without emulating bankrupt banks’ systems.

The problem, according to Zhao Changpeng’s tweet, is that new banks would find it difficult to participate in market competition due to their required conformity to the bankrupt banks’ model. In other words, there is no room for innovation or experimentation in the banking industry, preventing the market from functioning freely. Furthermore, it becomes challenging for new banks to enter the market with such stringent regulations; a fact that perpetuates the cycle of bankruptcy.

In conclusion, the ultimate message in the tweet is that the banking industry’s cyclic nature, combined with the challenges faced by new banks, contradicts the idea of a free market. Requiring new banks to conform to the same standards as their bankrupt predecessors dampens any attempts at innovation that could drive progress in the industry.