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Coinbase Offers Circle $3B Backstop to Stabilize the USDC

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More information are being revealed regarding the chaotic weekend following the Silicon Valley Bank collapse. This includes Coinbase Plans to rescue Circle as USDC stablecoin break its peg with dollar after the news of Circle’s deposits worth $3.3 billion were stranded at SVB.

More Details

According to a March 20 report it is recently revealed that an emergency credit facility worth multi-billion dollars came from the American cryptocurrency exchange Coinbase to the USDC issuer Circle.

Allegedly, Coinbase offered Circle Internet Financial, USDC issuer a credit facility worth $3 billion last week. The reason for the offer was to ensure full liquidity for the stablecoin after the Silicon Valley Bank collapse.

According to reports of those who are familiar with the transaction, Circle instructed the transfer of its funds out of SVB before the bank’s collapse.

However, the bank was received by the US FDIC (Federal Deposit Insurance Deposit Corp) before the funds can be wired out.

As a result, Circle’s $3.3 billion funds was exposed to SVB. When Circle exposed that they are massively exposed to the bank, it caused investors to panic and rushed to pull out their funds from the USDC coin. This caused the US Dollar to lose its peg.

These trend of events made Coinbase to extend its credit line to Circle to guarantee full liquidity for the stablecoin.

Noteworthy Facts

It is vital to observe that the USDC is a joint project of Circle and Coinbase. These 2 firms are working under the joint venture called the CENTRE Consortium.

After becoming clear of the FDIC plan of action concerning the collapsed bank (SVB), the USDC recovers its peg to the USD. As a result, the multi-billion dollar credit facility offered by Coinbase became unnecessary.

In a report by those familiar with the event, “the firm was about to announce the credit facility however, the same Sunday, banking regulators lifted FDIC thus, dispelling any sense of crisis.

Up till now, Circle refused to make any comment regarding the alleged credit facility by Coinbase. However, they haven’t denied the fact until press time.

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