USD Coin (USDC)
The time has come to break down one of the biggest and most known stablecoins of crypto. Issued by Circle, which is a key player in the financial technology sector and even has ties to BlackRock, the USD Coin is one of the most widely used stablecoins of the moment.
Let’s explore this stablecoin offering and see what it offers to decentralized finance and how it helps many even on a global scale.
USD Coin, with its ticker symbol USDC, is a fiat-backed stablecoin and one of the biggest (stable)coins in crypto. The coin is a type of cryptocurrency that is pegged to the U.S. dollar, which simply means that one USDC is designed to maintain a value of $1 and follows the volatility of the dollar.
Unlike traditional dollars, USDC operates on different blockchains and offers 24/7 availability in the ability to conduct transactions across borders without the typical banking fees or delays.
It is supported by cash and short-dated US treasuries held in regulated US financial institutions, more on this later, but since its launch, USD Coin even was the first crypto to be selected for settling transactions with Visa.
USD Coin was issued by Circle and launched on September 26, 2018, and quickly gained traction after Circle became a licensed financial entity recognized and regulated by several state departments within the United States.
When you purchase one USDC using fiat currency, that currency is deposited and stored as one US dollar in an account at a traditional financial institution, and a new USDC is minted.
Conversely, if you sell one USDC and exchange it for fiat currency, the USDC is burned, and the fiat is transferred back into your bank account. Note that these minting and burning processes are done by exchanges, and that the token you buy via the exchange comes right out of their reserves.
This review of USD Coin (USDC) was created for informational purposes. This article is not intended for promotion.
USDC is available on several leading blockchain networks such as Ethereum, Solana, Stellar, and Algorand. We speak about the Multi-Chain USDC that supports 15 blockchain networks, with the expectation of even more integrations.
For EVM-compatible chains, USDC is deployed via smart contracts, while for non-EVM chains, it utilizes built-in token primitives. USDC is available on the following blockchains and has sometimes enormous liquidity on:
As of the latest update, USDC boasts a substantial circulation amounting to $35.46 billion, with a 24-hour transaction volume of $16.8 billion. This high volume means heavy activity and large liquidity and indicates USDC as a preferred choice for many in the crypto community.
USDC has garnered significant support from Wall Street
Circle discloses USDC reserve holdings weekly and engages a Big Four accounting firm to provide monthly third-party assurance, ensuring reserve values exceed the circulating supply of USDC.
The reserves comprise cash at regulated financial institutions and investments in the Circle Reserve Fund (managed by BlackRock) which includes short-dated US Treasuries and overnight US Treasury repurchase agreements.
Since 2018, Circle has consistently issued detailed reports on reserve assets. Deloitte & Touche LLP, as Circle’s independent auditor since fiscal 2022, and Grant Thornton LLP from 2015, has critically reviewed Circle’s financials.
As touched upon in the above section, USDC is a regulated stablecoin that is fully reserved and has reserves that are transparently held at regulated financial institutions and are confirmed through published monthly attestations.Â
Notably, Circle’s partnership with Visa has facilitated the integration of USDC into mainstream financial infrastructure.Â
EUR Coin, also issued by Circle, has achieved a breakthrough by becoming the first cryptocurrency company in the European Union to gain regulatory approval under the EU’s Markets in Crypto-Assets (MiCA) framework.
Circle has strategically selected France as its European headquarters which makes it an advantageous location for Circle given the evolving regulatory landscape under the MiCA framework.
In the case of EURC, Circle’s strategy involves investing in products like Euro money market funds. These funds offer similar benefits to T-bills, and provide low-risk income while maintaining parity with the Euro.
Circle generates revenue by depositing the cash they receive from clients into bank accounts or conservative liquid assets. These assets accrue interest, which in turn become a source of revenue for Circle. This model is central to their operations as it allows for the effective management of large volumes of fiat currencies exchanged for stablecoins.
Global remittances, which were projected to exceed $630 billion in 2022, represent a significant application for USDC. Fintechs can utilize USDC to facilitate nearly instantaneous and cost-effective cross-border transactions, bypassing the traditionally expensive and slow financial systems.
Additionally, collaborations like that between Circle, the Stellar Development Foundation, and MoneyGram International facilitate straightforward conversion of USDC to local currencies, enhancing worldwide usability.
Amid rising global inflation, many individuals outside the US are seeking access to stable dollars. USDC provides a solution for users to send, spend, and store dollars, circumventing the often restrictive local banking systems in high-inflation countries.
This accessibility is a game-changer for reaching unbanked populations, as nearly 2 billion people worldwide lack access to traditional banking yet own an internet-connected device.
USDC serves as a gateway to decentralized finance, which offers lending, borrowing, and trading services that are typically faster and cheaper than their traditional counterparts.
USDC has become a preferred stablecoin in the world of decentralized finance, where it covers a very big volume and is supported on the most popular exchanges and protocols.
Their vision for an internet-based financial system is one that operates natively on the internet, utilizing blockchain networks as the foundational layer.
Decentralized finance with its primitives aims to issue digital cash and other tokens, such as stablecoins, which are seen as safer, and more inclusive compared to traditional financial systems. The core of this new finance is the concept of full reserve money, which contrasts sharply with the fractional reserve banking most are accustomed to, as was also experienced by Circle itself.
The collapse of Silicon Valley Bank (SVB) in early 2023 had a significant impact on several crypto-tied banks, including SVB itself, which held over $30 billion of Circle’s cash reserves.
This situation led to a temporary depegging of USDC from the dollar and a drastic decrease in its market cap. However, Circle and USDC managed to swiftly recover, regaining their one-dollar valuation and passing this financial stress test.
Circle, the company behind USDC, experienced one of its most stressful periods during this crisis. Post-crisis, Circle transitioned from relying on banks “on the margins” to being supported by larger financial institutions more systemically.
Circle’s banking infrastructure has evolved significantly, with integrations into domestic bank networks across various global regions including the US, Singapore, Hong Kong, the EU, and soon Brazil and Mexico.
The integration of stablecoins and blockchain is expected to revolutionize various financial sectors and perhaps all digital internet money in general which goes into the hundreds of trillions.
The primary function of USDC is to tokenize the biggest of them all (US dollar) and make them operable in an easy way online. With most of DeFi earning in USDC and one of the biggest markets that gives people in crypto a way to on- and off-ramp, Circle has more power than we know.
But if we look at the true ethos of crypto, it is not what this started for. Instead of paper fiat we get digital fiat. Perhaps this was always the end goal and this could be a way to introduce and popularize the CBDCs that are coming nevertheless.
USDC offers a stable and reliable way to engage with the digital economy, reducing the uncertainties associated with price volatility in the cryptocurrency market. Whether for everyday transactions, investment security, or participation in emerging financial technologies.
Disclaimer: Trading and investing in cryptocurrencies (also called digital or virtual currencies, altcoins) involves a substantial risk of loss and is not suitable for every investor. You are solely responsible for the risk and financial resources you use to trade crypto. The content on this website is primarily for informational purposes and does not constitute financial advice.
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