Coinbase allegedly offered Circle $3B lifeline during USDC depeg
Crypto exchange Coinbase reportedly offered a $3 billion lifeline to Circle as its stablecoin USDC de-pegged as a result of Silicon Valley Bank’s (SVB) collapse, according to a person familiar with the arrangement speaking to Fortune.
Circle was able to withdraw the majority of its funds before SVB and Signature Bank experienced bank-runs earlier this month. However, $3.3 billion remained locked in deposits at SVB. The immediate line of credit by Coinbase would have ensured USD Coin reserves were liquid and returned the stablecoin’s $1 peg, according to the source.
USDC’s market cap is $39 billion — the $3 billion locked, while a drop in the bucket in comparison, caused traders to lose confidence in the stablecoin. Its price slipped down to $0.88 on March 11 and eventually clawed its way back up to $1 by March 13.
Coinbase had a lot at stake if USDC never re-established its peg. USDC is managed by a consortium called Centre, founded by Circle. Members include Coinbase and Bitcoin mining company Bitmain, an investor in Circle.
- Coinbase partnered with Circle in 2018 to bring the stablecoin to market.
- In 2021, Coinbase chief Brian Armstrong went head-to-head with the Securities and Exchange Commission (SEC) when it threatened to sue regarding its USDC lending product.
- Coinbase scrapped the project soon after.
During the pandemonium, Circle chief Jeremy Allaire disabled USDC minting and redemption through Signature Bank’s SigNet. Coinbase subsequently halted USDC withdrawals on its platform. It cited the need for US dollar transfers from banks as the cause:
“During period of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours. When banks open on Monday, we plan to re-commence conversions,” the exchange tweeted on March 11.
Read more: Coinbase reportedly considers overseas expansion amid US crackdown
Coinbase’s line of credit turned out to be unnecessary. The US government basically bailed out USDC when it announced that all deposits at the two failed banks would be insured. Circle moved its cash to BNY Mellon.
However, Coinbase appears to not be counting on further favors from the US government. Sources told Bloomberg the exchange has reached out to partners to discuss plans to open a trading platform abroad.
For more informed news, follow us on Twitter and Google News or subscribe to our YouTube channel.
The post Coinbase allegedly offered Circle $3B lifeline during USDC depeg appeared first on Protos.