Coinbase, the American publicly traded company that operates a centralized cryptocurrency exchange platform of the same name, tried to be the crypto white knight to USDC stablecoin issuer Circle as it offered a $3 billion credit line to the company following the chaotic crash of Silicon Valley Bank (SVB) earlier this month.
The collapse of the state-chartered commercial lender Silicon Valley Bank brought along with its fall its depositors’ funds and significantly impacted the operations of many businesses, one of which is the stablecoin issuer Circle, as it stranded their deposits. Circle has over $3 billion in deposits grounded in the failed bank’s coffers.
The crash threatened the stability of the U.S. financial system and caused the USDC stablecoin to break from its 1:1 dollar peg after news surfaced that Circle has $3.3 billion in funds stranded at SVB – an amount which is less than 10% of the stablecoin issuer’s total reserve deposits.
With the markets in the chaos following depositors’ exodus from SVB, Coinbase offered Circle a lifeline, an interesting act considering that the CEX was once Circle’s rival, although both now share management and profits of the stablecoin USDC.
Coinbase didn’t only extend an immediate line of credit to Circle that would have guaranteed total liquidity of its USDC reserves following SVB’s collapse Sunday, but also assured the stablecoin issuer that the stablecoin could be converted to U.S. dollars by Monday morning, Fortune reported, citing a “person privy to the arrangement.”
Apparently, Circle was preparing to announce the credit facility offered by Coinbase on March 10, but on the same day, regulators dispelled the crisis and lifted the FDIC. Fortune said that Circle did not deny or confirm the Coinbase offer and instead just declined to comment.
Circle sent wiring instructions for its funds to the lender but before the wire went through, Silicon Valley Bank collapsed on March 10, which put the stablecoin issuer in the same position as all other depositors and businesses, who spent several days in limbo thinking about the future of their funds with the fallen bank.
Meanwhile, Coinbase, more than a week after another lender, Signature Bank, collapsed, reportedly told its clients Monday that it is no longer supporting Signet, the real-time payments network of Signature Bank.
Although Coinbase, one of the world’s largest crypto trading platforms, assured its users that it is currently looking for a new payment network provider, its customers who use Signet for U.S. dollar deposits and withdrawals will not be able to do so outside of banking hours.
