The US-based cryptocurrency exchange – Coinbase – reportedly offered a line of credit worth $3 billion to Circle to help it fix its financial cracks after the collapse of Silicon Valley Bank.
The stablecoin-issuer revealed a whopping $3.3 billion exposure to SVB, which negatively affected the price of USDC. The asset plunged way below the $1 target but later restored its valuation.
According to a recent Fortune coverage, Coinbase was ready to stimulate Circle with $3 billion. A person familiar with the matter informed that the funds would have guaranteed full liquidity for USDC reserves, assuring the stablecoin could be converted to US dollars shortly after the crash of Silicon Valley Bank.
The entities were close to completing the deal but reverted once USDC restored its peg against the greenback. This happened after Circle issued a reassuring statement, vowing to cover any investor losses due to the SVB crisis:
“In such case, Circle, as required by law and under stored-value money transmission regulation, will stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary.”
In addition, the leading financial watchdogs in the USA promised to save each depositor at SVB, even those with exposure higher than $250,000.
President Biden also touched upon the crash with the former banking behemoth, outlining that “no losses will be borne by the taxpayers.” On the other hand, investors and shareholders at the bankrupt institution will have no protection since “that’s how capitalism works.”
CEO Jeremy Allaire recently hinted that his company did not need the regulators’ help since it was ready to use its own corporate funds to prevent further problems from the exposure to SVB. He also added that cash reserves had been moved to Bank of New York Melon:
“Fortunately, we didn’t need to do that. We’ve moved all of our assets to Bank of New York Melon, as well as held in the Circle Reserve Fund, which is short-term T-bills managed by Blackrock.”
The stablecoin issuer also disclosed it might add additional banking partners and improve redemption services after the latest setback caused by the SVB demise:
“Circle has worked tirelessly to re-initiate 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.”