What is USDC (USDC)?

Stablecoins were introduced as an answer to the concerns about the extreme price volatility of cryptocurrencies. However, over the years, stablecoins have started to serve more than one purpose, most notably acting as a buffer between fiat currencies and cryptocurrencies. This has caused users to demand greater accountability and transparency from stablecoin issuers. The result was the introduction of regulated stablecoins. USDC is the largest regulated stablecoin in terms of crypto market cap contribution. This article will lay down the basics of USDC and help you understand why it has commanded a dominant position in the crypto space that is flooded with digital tokens. Let’s jump in.

USDC– The Basics

USDC stands for USD Coin and its value is pegged to the US dollar. This means that 1 USDC is designed to always be worth 1 US dollar. The cryptocurrency maintains its value through a process called collateralization. For every USDC token in circulation, an equivalent amount of US dollars is held as hard reserves. These reserves are subject to regular audits to ensure transparency and trust. So, if you own 1 million USDC, there should be 1 million US dollars sitting in a bank account somewhere, which you can, in theory, claim anytime you want. At the time of writing, USDC’s market cap exceeds $30 billion. 

The Origin of USDC

USDC was launched in 2018 by a consortium called Centre, which was formed by Coinbase and Circle. Coinbase is one of the biggest cryptocurrency exchanges in the world and Circle is a fintech company focused on cryptocurrencies. Circle is responsible for the issuance and redemption of USDC, ensuring that every token is fully backed by a dollar in reserve. Coinbase, on the other hand, provides liquidity and accessibility by offering USDC on its platform. This collaboration brings together Circle's expertise in financial technology and Coinbase's massive user base and infrastructure.

USDC Utility and Function

USDC is the second most popular stablecoin out there. Here are some common ways people use this cryptocurrency. 

Trading: Many traders use USDC to quickly move money in and out of volatile cryptocurrencies. It’s like an instrument on which you can safely park funds without leaving the crypto ecosystem.

Payments: Since the value of USDC is stable, it is used for real-life transactions. Major companies including Microsoft, Twitch, and ExpressVPN accept USDC as payment for their services.

Remittances: While sending money across borders via traditional methods can be damn expensive and slow, you can send money quickly with USDC at a significantly lower fee.

Savings and Yield: On DeFi platforms, you can park your money as USDC to earn interest. On platforms like Aave and Compound, USDC is one of the most deposited and borrowed tokens.

Auditing and Transparency

USDC’s reserves are audited monthly by Grant Thornton LLP, one of the top auditing firms globally. These audits are crucial for verifying that the amount of US dollars held in reserve matches the total supply of USDC tokens in circulation. The monthly reports of the audits are publicly available and can be accessed on Circle’s website. They have also made the inner workings and financial backing of the token transparent and understandable to the public. Circle frequently updates the changes or developments related to USDC, including regulatory compliance, changes in reserve management, or any significant events that might impact USDC. The consortium is also committed to adhering to all relevant regulations, including Anti-Money Laundering (AML) practices, which help prevent fraudulent activities and ensure that USDC operates within the bounds of the law.

Integration with Traditional Finance

USDC is a cryptocurrency that is not just limited to the crypto world. In 2021, the US Office of the Comptroller of the Currency (OCC) stated that banks can use stablecoins to send and receive payments. Traditional financial institutions including payment processors are now beginning to recognize its potential and are exploring ways to incorporate USDC into their services, bridging the gap between traditional finance and cryptocurrencies.

The Future of USDC

Since its launch, USDC has been growing rapidly and is now one of the top stablecoins in the market. The stablecoin is being integrated into various financial systems and is a key player in the DeFi space. As the world of digital finance evolves, USDC is expected to play a big role in how we handle money in the future. However, the authenticity of financial data published by Circle and the quality of audits on its accounts have been hotly debated.

Wrapping Up

In a nutshell, USDC is a stablecoin that is regulated by the US financial watchdogs. It is a useful tool for trading, payment processing, and much else. Created by trusted names in the crypto space, USDC is backed by real dollar reserves and regularly audited to ensure its peg to the US dollar. Over the years, USDC has witnessed exceptional growth and is now the 8th biggest cryptocurrency by means of market capitalization. The future of USDC will be heavily influenced by the changing perspective of the public about cryptocurrencies and the evolution of the regulatory environment.