Since the collapse of Silicon Valley Bank stopped funds from exiting Circle’s account, Coinbase reportedly created a $3.3 billion USDC rescue package for Circle.
After Circle failed to move money out of Silicon Valley Bank, causing a selloff that led to USDC losing its peg to the dollar, the exchange volunteered to step in.
According to a person who spoke to Fortune, Coinbase was ready to provide Circle with an immediate credit line to support USDC’s liquidity. If the Federal Deposit Insurance Corporation had not stepped in to back up SBV deposits on March 12, 2023, users would have had access to funds by March 13, 2023.
On March 8, 2023, Silicon Valley Bank increased capital to increase liquidity after a rise in withdrawals following the failure of Silvergate. The bank’s stock price had decreased by almost 60% by morning. Circle tweeted that it attempted to withdraw its reserves with a wire transfer from the bank on March 9, 2023, but was unsuccessful at 10:11 p.m. ET on March 10, 2023.
Dante Disparte, chief strategy officer of Circle, stated that the team put up a lot of effort to safeguarding USDC. His tweet could have been sent out around the time when Coinbase discussions got underway. Although the FDIC declared it will recognize all SVB withdrawal requests, Coinbase and Circle were unable to disclose the agreement.
Sam Bankman-Fried, the former CEO of FTX, intervened to lend money to struggling cryptocurrency companies following the bankruptcy of cryptocurrency broker Voyager Digital in July 2022. According to mainstream media, he serves as crypto’s lender of last resort, just like JPMorgan did for the trade finance industry. But, not everyone agreed that the former millionaire was as charitable as everyone thought.
According to a story from Bloomberg published today, Coinbase may establish an offshore division as regulatory scrutiny of the sector in the United States increases. According to Bloomberg, the new facility would likely be used for international transactions. All transactions are now routed through the main Coinbase marketplace by Coinbase.
Emilie Choi, the exchange’s chief operating officer, stated during an earnings call that “international growth is going to continue to be a very important component of how we operate,” despite the exchange not confirming the claim. Choi praised recent legislative advancements in Europe and the United Kingdom and declared that Coinbase will keep making investments in those regions.
Recently, Coinbase commended the U.K. for starting talks on a new financial services regulatory framework for digital assets.
On April 18, 2023, the European Parliament will hold a hearing on the Markets-in-Crypto Assets (MiCA) Bill, which affects all 27 members of the EU.
Coinbase’s planned use of Circle as a backup raises more concerns about whether the company acted in its best interests. According to Coinbase CEO Brian Armstrong, the exchange has a stake in the success of USDC.
Customers could convert their USDT stablecoins, produced by Tether, into USDC in December of last year through Coinbase. This offer was made in the midst of the market upheaval brought on by FTX’s demise.
Armstrong underlined that the action was not meant as a criticism of Tether but rather as a reflection of Coinbase’s motivation to expand USDC.
In 2018, the US exchange collaborated with Circle to create USDC under the CENTRE Consortium. From the reserves Circle utilizes to support USDC, it receives interest.