Coinbase reportedly prepared a $3.3 billion USDC rescue package for Circle after the failure of the Silicon Valley bank prevented funds from withdrawing from its account.
The exchange offered to step in after Circle failed to withdraw funds from the Silicon Valley bank, triggering a selloff that caused USDC to lose its dollar peg.
Coinbase Offers Circle $3.3 Billion Instant Credit Line
A source told Fortune that Coinbase was willing to offer Circle an immediate line of credit to backstop the liquidity of USDC. By March 13, 2023, users would have had access to the funds if the Federal Deposit Insurance Corporation had not stepped in to back up SBV deposits on March 12, 2023.
Silicon Valley Bank on March 8, 2023 raised capital to boost liquidity amid a surge in withdrawals following the collapse of Silvergate. The next morning, the bank’s share price had fallen by nearly 60%. On March 10, 2023 at 10:11 PM, Circle tweeted that it unsuccessfully attempted to pull its reserves via wire transfer from a bank on March 9, 2023.
Dante Disparte, Circle’s chief strategy officer, said the team worked diligently to protect USDC. His tweet may have come around the time negotiations with Coinbase began. Coinbase and Circle were unable to announce the deal after the FDIC announced it would honor all SVB withdrawal requests.
Following the collapse of crypto broker Voyager Digital in July 2022, former FTX CEO Sam Bankman-Fried stepped in to offer funding to ailing crypto firms. Mainstream media labeled him as the lender of last resort to crypto, similar to the role JP Morgan plays in the Tradefi sector. However, some questioned whether the former billionaire was quite as philanthropic as everyone had assumed.
New Report Shows Coinbase Eyes Offshore Expansion
Today’s Bloomberg report suggests Coinbase may set up an offshore facility as US regulatory scrutiny of the industry intensifies. Bloomberg revealed that there will likely be global transactions through the new facility. Currently, Coinbase routes all transactions through the main Coinbase Marketplace.
While the exchange has not confirmed the report, its chief operating officer Emily Choi said on an earnings call that “international expansion will continue to be a very important part of the way we operate.” Choi praised recent regulatory developments in Europe and the UK and said Coinbase will continue to invest in those jurisdictions.
Coinbase recently praised the UK for launching consultations on a new future financial services regulatory regime for crypto assets.
The European Parliament will debate Europe’s Markets-in-Crypto Assets (MiCA) bill on April 18, 2023, which spans the 27 EU member states.
Coinbase Was Possibly Willing To Act In Its Own Interest
Coinbase’s intended backstop of Circle also raises questions about whether it acted in its own interests. By the admission of Coinbase CEO Brian Armstrong, the exchange has a vested interest in seeing USDC succeed.
In December last year, Coinbase gave customers the option to convert their USDT stablecoins issued by Tether to USDC. The offer came amid market turmoil caused by the collapse of FTX.
Armstrong emphasized that the move was not intended as a comment on Tether, but rather, reflects the encouragement Coinbase had to raise USDC.
“It’s just that we co-created USDC with Circle and we have an economic interest in seeing that grow, and so we want to encourage people to use USDC,” Armstrong told the Wall Street Journal. Are.”
The US exchange partnered with Circle to develop USDC through the Center consortium in 2018. It earns interest from being used by Reserve Circle to back USDC.
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