What is the USDC?

USDC is a digital dollar that combines the stability of traditional U.S. dollars with the speed and efficiency of the internet. It allows users to engage in transactions just like they would with any dollar—buying and trading assets, sending and receiving payments, or saving money.

What is a stable coin?

Stablecoins are cryptocurrencies whose value is pegged, or tied, to that of another currency, commodity, or financial instrument. Stablecoins aim to provide an alternative to the high volatility of the most popular cryptocurrencies, including Bitcoin (BTC), which has made crypto investments less suitable for everyday transactions.

Who Issues USDC?

USDC is issued by Circle, a financial technology company based in the United States founded in 2013 by Jeremy Allaire and Sean Neville, Circle is a fintech company that has positioned itself as a crypto payment and exchange platform. Circle is regulated as a money transmitter and holds necessary licenses across all U.S. jurisdictions. Additionally, it has virtual currency licenses in New York and Louisiana and is registered as a “Money Services Business” with FinCEN. Circle also has relevant international licenses in Singapore, the UK, and Bermuda.

How is USDC Backed?

USDC is fully backed by cash and highly liquid cash-equivalent assets. The majority of the reserves are held in the Circle Reserve Fund (USDXX), which is an SEC-registered 2a-7 government money market fund. Daily independent reporting on the Circle Reserve Fund portfolio is publicly available through BlackRock.

Which Blockchains is USDC Available On?

USDC is natively supported on 18 blockchain networks, including Algorand, Aptos, Arbitrum, Avalanche, Base, Celo, Ethereum, Hedera, NEAR, Noble, OP Mainnet, Polkadot, Polygon PoS, Solana, Stellar, Sui, Unichain, and zkSync, with more expected in the future. As a stablecoin, USDC is programmed to maintain a 1:1 peg to fiat currencies like the USD, combining blockchain technology with the stability needed for practical cryptocurrency use.

How Does USDC Work?

USDC operates as a stablecoin built on blockchain technology, designed to maintain its value by being backed by a reserve of U.S. dollars. Initially, USDC was created on the Ethereum blockchain, functioning as an ERC-20 token, which allows compatibility with numerous wallets and platforms.

To create new USDC, users deposit U.S. dollars with Circle, which then places these funds with verified financial partners. Circle issues an equivalent amount of USDC on the chosen blockchain, ensuring that every USDC in circulation is backed by a real U.S. dollar.

USDC can be used for transactions, payments, or as a means of storing value. It can be traded on exchanges, used for online payments, or transferred between users via crypto wallets. To enhance interoperability, Circle has implemented the Cross-Chain Transfer Protocol (CCTP), allowing seamless transfers between different blockchains via a burn/mint mechanism.

What Are USDC Tokens Used For?

USDC tokens serve as a stable and less volatile alternative to cryptocurrencies like Bitcoin and Ethereum, facilitating transactions within the cryptocurrency ecosystem. They are widely used in decentralized finance (DeFi) for trading, lending, and borrowing, as well as for fast and cost-effective international payments. USDC allows users to maintain the value of their dollar-denominated assets while participating in the crypto space.

Circle generates income from USDC reserves by investing a portion of the collected U.S. dollars in short-term U.S. Treasury bills. As of now, USDC reserves are structured as follows:

• 12% in dollars held in various banking institutions (e.g., Bank of New York Mellon)
• 88% in U.S. Treasury bills with maturities of three months or less

In comparison, USDT reserves consist of only 0.12% in bank accounts, with the remainder being 88% in U.S. Treasury bills and 11% in other assets like gold and Bitcoin. This structure makes USDC one of the most liquid stablecoins available, ensuring rapid access to funds.

What Are USDC’s Future Projects?

In 2024, Circle plans to enhance USDC adoption by expanding partnerships with financial institutions and technology companies. The company aims to integrate USDC into more blockchain networks to improve interoperability and reduce transaction fees. Additionally, Circle is working on innovative payment solutions based on USDC to drive global adoption of digital payments.

The coin has also recently become the first US dollar-pegged stablecoin to be authorised to be issued in Japan. The Dubai Financial Services Authority (DFSA) has also approved USDC as recognized crypto tokens within the Dubai International Financial Centre.