USDC issuer Circle offered $3 billion emergency backstop from Coinbase

• Coinbase reportedly offered a $3 billion credit facility to USDC issuer Circle Internet Financial.
• The credit facility was to guarantee full liquidity for the stablecoin following the collapse of Silicon Valley Bank.

A multi-billion dollar emergency credit facility from American crypto exchange Coinbase to Circle Internet Financial recently came to light. The credit line was reportedly offered to the USDC issuer last week after the collapse of Silicon Valley Bank. The bank contained $3.3 billion of Circle’s reserve deposits that backed the world’s second largest stablecoin. 

$3 billion credit facility to support USD Coin’s liquidity

As per a 20 March report by Fortune, Coinbase offered a whopping $3 billion credit facility to Circle to guarantee the liquidity of its USDC stablecoin. According to people familiar with the matter, Circle had issued instructions to transfer its funds out of Silicon Valley Bank ahead of its collapse. However, the financial institution was seized by the United States Federal Deposit Insurance Deposit Corp (FDIC) before the funds could be wired out. 

This resulted in a $3.3 billion exposure to the bank. When Circle revealed that massive exposure, investors panicked and rushed to pull their funds from USD Coin, causing the stablecoin to lose its peg to the US Dollar. This prompted Coinbase to extend the credit line to ensure sufficient liquidity for the stablecoin. It is important to note that USD Coin is a joint project of Coinbase in association with Circle. The two firms operate under a joint venture known as the CENTRE Consortium. 

Upon receiving clarity from the FDIC regarding the plan of action for the downed bank, USDC regained its peg to USD, rendering the multi-billion dollar credit facility unnecessary.

The report read:

“The companies were on the verge of announcing the credit facility but, the same Sunday, banking regulators lifted the FDIC and dispelled the sense of crisis.”

Circle declined to comment on the credit facility but has not denied it until press time.