Details regarding the hectic weekend that followed the failure of Silicon Valley Bank continue to emerge, including Coinbase’s plan to ride to Circle’s rescue when the USDC stablecoin lost its peg to the dollar following news that $3.3 billion of Circle’s holdings were stuck at the bankrupt bank.
According to a person familiar with the agreement, Circle sent orders on the fateful Friday to wire out its funds, but the bank failed before the transfer could be completed. This put Circle in the same boat as hundreds of other Silicon Valley Bank clients, who were left wondering what would happen to their savings, which were only insured up to $250,000 under FDIC rules.
Despite the fact that the stranded $3.3 billion represented less than 10% of Circle’s total reserve deposits, anxious investors sold USDC, forcing the stablecoin to break its peg and temporarily trade around the 90-cent mark.
Meanwhile, Circle’s restless crew rushed to find a solution to ensure markets that its stablecoin was still worth a dollar. The startup received a potential lifeline from Coinbase, a former competitor that now has a stake in the management (and revenues) of USDC.
According to Fortune, the person who knew about the agreement said that Coinbase offered a line of credit immediately so that Circle could guarantee full liquidity for USDC reserves ensuring the stablecoin would be converted to USD.
Regulators, who have attempted to portray cryptocurrency as the villain in the present crisis, see the irony as they scurry to bail out the banks that caused the disaster in the first place.