Coinbase Offered $3 Billion Loan to Circle Amid SVB Turmoil (Report)

Coinbase Offered $3 Billion Loan to Circle Amid SVB Turmoil (Report)

The US-based cryptocurrency exchange – Coinbase – reportedly offered Circle a $3 billion credit line to help it mend its financial rifts following the collapse of Silicon Valley Bank.

The stablecoin issuer revealed a whopping $3.3 billion exposure to SVB, which negatively impacted the price of USDC. The asset plunged well below the $1 target but later restored its valuation.

Help in an emergency?

According to a recent Fortune report, Coinbase was ready to incentivize Circle with $3 billion. A person familiar with the matter said the funds had guaranteed full liquidity for USDC reserves, ensuring that the stablecoin could be converted into US dollars shortly after the Silicon Valley Bank collapsed.

The companies were close to finalizing the deal but backtracked when USDC restored its peg to the greenback. This happened after Circleissueda reassuring statement that promises to cover any investor losses due to the SVB crisis:

“In such an event, Circle will stand behind USDC, as required by law and the Transfer of Money of Stored Value Regulation, and cover any shortfall with corporate resources, including external capital where appropriate.”

Also the leading financial watchdogs in the USApromisedto save every depositor at SVB, even those with a commitment of more than $250,000.

President Biden also addressed the crash with the former banking giant.outlinethat “no losses will be borne by taxpayers.” On the other hand, investors and shareholders in the bankrupt institution have no protection because “that’s how capitalism works.”

Switch to other banks

CEO Jeremy Allaire recentlyindicatedthat his company does not need the help of the supervisory authorities as it is prepared to use its own corporate resources to prevent further problems as a result of its involvement with SVB. He also added that cash reserves were moved to Bank of New York Melon:

"Fortunately, we didn't have to do that. We moved all of our assets to Bank of New York Melon and held them in the Circle Reserve Fund, which are short-term T-bills managed by Blackrock."

The stablecoin issuer toodisclosedIt could add additional banking partners and improve redemption services after the recent setback caused by the demise of SVB:

"Circle has worked tirelessly to resume services with alternative banking partners, particularly payment and USDC redemption services. We would like to thank our customers for their patience during these unprecedented times."

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