A new report suggests that the US crypto exchange Coinbase offered Circle a $3.3 billion package to restore the USDC peg following the collapse of Silicon Valley Bank (SVB) that left about 10% of stablecoin reserves in limbo.
A Fortune report on Monday, March 20th, citing people familiar with the arrangement, suggests that USDC issuer Circle tried to wire out its funds from SVB on Thursday, March 9th, but the bank collapsed on Friday, March 10th, before the transaction went through. This left $3.3 billion of Cirlce’s deposits stranded at the bank.
Coinbase Comes to Rescue
The news of the bank collapse led panicked investors to sell off USD Coin (USDC), which resulted in the stablecoin breaking its peg with US Dollar and briefly trading around 90 cents.
The Circle team scrambled to find ways to restore the peg and found a lifeline at the hands of Coinbase. According to a person familiar with the events, Coinbase offered an immediate line of credit to the USDC issuer that would have guaranteed full liquidity for the stablecoin reserves.
However, both entities couldn’t announce the deal as FDIC later that same weekend announced that all depositors would be made whole, which caused the USDC to restore the peg within hours.
Had the FDIC not stepped in to back up SBV deposits, USDC would have restored its peg anyway. Regulators are painting crypto as a villain in the recent banking crises. But this event demonstrates the ability of the crypto sector to avert any banking and financial disaster.
The unfortunate events of 2022 left a deep strain on crypto’s reputation, but the appreciating prices of Bitcoin and other cryptos in the wake of this banking crisis highlight the resilience of the crypto market.
Coinbase Explores Offshore Venues
A recent Bloomberg report suggests that Coinbase is eyeing offshore expansion as the US regulatory landscape is becoming soured for the crypto sector. According to Bloomberg sources, the exchange management is in talks with global institutional clients to set up a new offshore platform “away from the main Coinbase marketplace.”
A March 8th company blog post shows that Coinbase is now deeply focused on its internationalization strategy. The exchange said that over the next two months, it would roll out several “new initiatives in countries outside the US spanning across six continents: South America, Europe, Africa/Middle East, Asia, Australia, and North America.”
