Coinbase Offered a $3 Billion Credit to Circle Amid the SVB Turmoil (Report)

Summary of the Article

  • Coinbase reportedly offered Circle a $3 billion line of credit after their financial issues with Silicon Valley Bank.
  • USDC had plunged below its target price, but restored after Circle issued an assuring statement.
  • The US financial watchdogs also promised to save all depositors at SVB, even those with exposure higher than $250,000.

Details about Coinbase and Circle’s Deal

Coinbase was supposedly close to provide Circle with a $3 billion credit. The US-based cryptocurrency exchange – Coinbase – reportedly offered a line of credit worth $3 billion to Circle to help it fix its financial cracks after the collapse of Silicon Valley Bank. The stablecoin-issuer revealed a whopping $3.3 billion exposure to SVB, which negatively affected the price of USDC. The asset plunged way below the $1 target but later restored its valuation.

According to a recent Fortune coverage, Coinbase was ready to stimulate Circle with $3 billion. A person familiar with the matter informed that the funds would have guaranteed full liquidity for USDC reserves, assuring the stablecoin could be converted to US dollars shortly after the crash of Silicon Valley Bank. The entities were close to completing the deal but reverted once USDC restored its peg against the greenback. This happened after Circle issued a reassuring statement, vowing to cover any investor losses due to the SVB crisis: „In such case, Circle, as required by law and under stored-value money transmission regulation, will stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary.“

Financial Watchdog Promise

In addition, the leading financial watchdogs in the USA promised to save each depositor at SVB, even those with exposure higher than $250,000. This allowed for less pressure on both companies and further reassured investors that their funds were safe during this period of turmoil.

Circumstances Leading Up To Peak Financial Pressure

Circle initially faced these issues when they attempted an IPO back in 2019 which didn’t succeed causing them some stress while they were trying hard just not let go of their vision in spite of having lost almost half their value since 2018 when they were valued at approximately 4$billion USDs which is now 2$billion USDs according to reports from Bloomberg. They also then entered into an agreement with Goldman Sachs where Goldman Sachs invested around 440 million dollars in cash as well as debt for stock conversion along with other considerations including equity investments from other venture capitalists and angel investors like Michael Novogratz who has been associated with cryptocurrency and blockchain technology for quite some time now .

Impact On Crypto Market

This news had surely created ripples within crypto market due primarily because it represented one of largest players within space attempting an IPO , however then withdrawing plans only few weeks before actual date due primarily because company was unable meet certain conditions set by SEC or Securities Exchange Commission . Such events will surely create press related news stories as well as can generate negative sentiment amongst general public regarding cryptocurrencies . However , it should be noted that such events are usually short lived and crypto markets tend recover fairly quickly from such events . Therefore , we can expect markets remain fairly resilient over long term .

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