The crypto market is tumbling, and decentralized finance (defi) firms that deal heavily in volatile digital assets are looking for a bailout — just not from the federal government.
In part, that's because crypto firms can't access emergency loans from the Federal Reserve like regular banks. They're also unlikely to get assistance from the federal government at the moment, given that many are essentially unregulated entities. This has left the industry to fend for itself, and several major players are stepping up to offer a lifeline. 
On June 21, defi lender BlockFi revealed that it had secured a $250 million line of credit from FTX, a deep-pocketed crypto exchange known for its outspoken CEO Sam Bankman-Fried and sponsorship deal to rename the home of the Miami Heat to FTX Arena. 
Bankman-Fried's trading firm, Alameda Research, also provided $200 million to the crypto investment platform Voyager Digital in a bid to stabilize the company's balance sheet. The company is facing headwinds from the collapse of Three Arrows Capital, a crypto hedge fund that defaulted on a $670 million loan from Voyager earlier this week.
Now other companies are trying to get in on the action. Morgan Creek Digital, a hedge fund that specializes in crypto assets, has pitched a similar $250 million bailout to BlockFi, while Goldman Sachs is reportedly looking to raise $2 billion from investors to buy up assets from Celsius, a struggling defi lender that is currently weighing Chapter 11 bankruptcy. 
Why are these companies so willing to shell out such large sums of money to keep competing firms alive? Some are comparing the current bailout spree to the 1907 banking crisis when JP Morgan (the man, not the company) stepped in with private funds to avert a run on banks. 
Notably, this took place before the Federal Reserve was created in 1913. So, similar to today's crypto firms, it's not like Morgan and those turn-of-the-century banks had other options. It was that or financial meltdown. 
Of course, the 1907 episode helped galvanize the political effort to create a central bank, which ultimately replaced the need for private actors to prop up the banking system in times of crisis.
It's possible this latest crypto crash will inspire lawmakers to extend government protections to the crypto sector, but right now, the federal government appears hesitant. SEC Commissioner Hester Peirce, for instance, expressed concerns about throwing a lifeline to such dysfunctional companies. 
"Crypto does not have a bailout mechanism," Pierce told Forbes. "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, I would not want to use that authority, we really need to let these things play out."
Put another way, Peirce doesn't want to encourage bad behavior by bailing out firms that, in her view, probably shouldn't get another chance. 
Some in the crypto community happen to agree with the SEC commissioner. 
Binance CEO Changpeng Zhao wrote in a blog post that companies and products that are poorly managed, operated or designed "should not be saved."
"Sadly, some of these 'bad' projects have a large number of users, often acquired through inflated incentives, 'creative' marketing, or pure Ponzi schemes," he wrote. 
He also noted that crypto firms have significantly more leverage now than they did in 2018 — the last crypto downturn — and that more lenders are likely to get liquidated going forward.
Whatever happens to the crypto space, regulators are confident the contagion will remain within the industry. Fed Chair Jerome Powell last week told the Senate Banking Committee that "not really seeing significant macroeconomic implications, so far." 
As for whether the Fed would ever intervene, Powell kept his comments broad, again noting that crypto was a "very innovative new space" that was in need of greater regulation. 
Outside of the U.S., the United Kingdom has shown itself more open to intervention in cases where the stability of the whole economy was in danger. The UK Treasury recently released a paper proposing a "special administrative regime" that would give the Bank of England the power to help crypto firms deemed systemically important. 
IMF Managing Director Kristalina Georgieva, meanwhile, urged governments not to abandon the industry based on the latest financial crisis, though she didn't say specifically they should intervene. 
"I would beg you not to pull out of the importance of this world," she said at the World Economic Forum's annual meeting in Davos. "It offers us all faster service, much lower costs, and more inclusion, but only if we separate apples from oranges and bananas."