Coinbase reportedly offered a $3 billion credit line to Circle last week.
The funds were meant to serve as a backstop for the reserve that backs USD Coin.
The emergency credit line was offered after Silicon Valley Bank’s collapse, which held $3.3 billion of Circle’s USDC reserve deposits.
A multi-billion dollar credit line has become the latest development in the aftermath of Silicon Valley Bank’s collapse, as details of the fateful weekend continue to emerge. Coinbase reportedly offered a whopping $3 billion to Circle Internet Financial, the crypto firm that issues the world’s second-largest stablecoin USD Coin (USDC).
Coinbase offered the credit facility to protect USDC
According to a report by Fortune, the emergency credit line to Circle was to ensure the stability of USDC after the stablecoin lost its peg to the U.S Dollar last week. The de-pegging came after Circle disclosed a $3.3 billion exposure to Silicon Valley Bank shortly after the latter was seized by the U.S Federal Deposit Insurance Corp (FDIC).
A person familiar with the matter revealed that the USDC issuer had lined up transactions to transfer its reserve deposits out of Silicon Valley Bank just days before it was shut down by the FDIC. However, news of SVB’s closure and Circle’s stranded funds caused panic among investors who then rushed to pull their money from USD Coin. The result was the de-pegging of the USDC from the US Dollar, with the stablecoin trading below 90 cents for a brief amount of time.
As Circle scrambled to reassure investors about the stability of their stablecoin, Coinbase offered an emergency $3 billion credit line to ensure full liquidity for USDC. The stablecoin issuer has not denied the report but has refrained from commenting.
The companies were on the verge of announcing the credit facility but, the same Sunday, banking regulators lifted the FDIC and dispelled the sense of crisis.”