What is USD coin (USDC)? Your ultimate guide

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What is USD coin (USDC), and can it continue to grow its userbase?

USDC coins falling downwards                                 
USDC could be the next big stablecoin, its backers believe – Photo: Shutterstock


In a world where more and more people are drawn to the idea of a cryptocurrency that is not volatile, coins such as USDC appeal. So what is USD coin (USDC)? Can it serve as an alternative to the likes of Tether? How does USD coin work? What is USD coin used for? Let’s take a look.

The most important thing to note about the USD coin is that it is a stablecoin. This means that it works differently from the way a regular cryptocurrency operates.

How stablecoins work

If you have been paying attention to the world of crypto, then you will have seen that the prices of cryptocurrencies can fluctuate rapidly. That is probably one of the reasons why more people are not involved in cryptocurrency investment. It is not uncommon to see massive price rises in relatively short periods of time and, conversely, massive price drops in relatively short periods of time. There is a possibility that, by investing in a traditional cryptocurrency, you could either make a substantial sum or lose it all. 

On the other hand, there are issues with conventional, fiat currency that crypto and the blockchain aim to solve. Some people are concerned about privacy, or the lack of privacy, surrounding traditional finance. There are also people who are frustrated by what they see as a collective reliance on centralised financial institutions such as banks and regulators.

The speed of fiat transactions also comes in for frequent criticism, as do the high fees charged to those who need to send money internationally.

Stablecoins are a compromise proposed by certain sectors of the crypto space. The idea behind a stablecoin is that it is a digital currency that minimises volatility, is practical for daily use, and addresses the issues with fiat currencies that make things more expensive for people. A stablecoin is a cryptocurrency that is linked, or pegged to a fiat currency. In most cases, this is the US dollar.

The stablecoin usually becomes stable through a process of collateralisation. This means coins have a reserve fund ensuring that every stablecoin is backed by an equivalent amount of the pegged asset. So, if there are two million units of a stablecoin pegged to the dollar in circulation, there should be $2m sitting in a bank account somewhere to back up the stablecoin. However, that is not always the case.

What about the USD coin itself?

USD Coin: The centre of the circle

The USD coin is run by a consortium called Centre, which involves the peer-to-peer payments company Circle, in conjunction with the cryptocurrency exchange Coinbase. The consortium’s bosses and, by extension, the USDC coin founders, are the American internet entrepreneurs Jeremy Allaire and Sean Neville. The USD coin cryptocurrency was launched in 2018.

As the co-founders wrote in a post when the crypto was launched: “We believe that an open internet of value exchange can transform and integrate the world more deeply, eventually eliminating artificial economic borders and enabling a more efficient and inclusive global marketplace that connects every person on the planet. The future of the global economy is open, shared, inclusive, far more evenly distributed, and powerful not only for a few chosen gatekeepers, but for all who will connect.

“This vision relies upon an open standards model for fiat money on the internet, which is emerging now with broad industry support behind USDC. The potential is immense, and we are excited to be part of this next step.”

How USD Coin is supposed to work

USDC infographic
How USD coin (USDC) works – Credit: Currency.com

How the USD coin (USDC) works is fairly straightforward. A customer sends US dollars to the coin issuer, who then uses a smart contract – a piece of computer programming that automatically executes once certain conditions are met – to convert them to the USD coin cryptocurrency. Then, the newly minted stablecoins are sent to the customer and the dollars are held in a reserve. At least, that is how it is supposed to work. 

Since the coin was launched in 2018, Circle has provided so-called attestations from the accounting firm Grant Thornton about the crypto’s reserves. These attestations give a snapshot from a particular moment in time, but they are not as strong as a full audit. In addition, according to the Financial Times, what the attestations say about the reserves has changed somewhat over the years.

At the start, they said that the USD coin was backed by dollars in approved American depository institutions. After March 2020, though, the statements said that reserves were kept in institutions and in “approved investments”, but did not say what these investments were. The FT also said that, as of June 2021, the wording on the crypto’s website had changed from “backed by US dollars” to “backed by fully reserved assets”.

This may well warrant a closer look. In November 2021, the Grant Thornton attestation found that there were 38,744,141,217 USDC in circulation, and that “the total fair value of US dollar denominated assets held in segregated accounts are at least equal to the USDC in circulation at the report date”.

In a statement, a spokesperson for Circle said: “Such accounts are held at US regulated financial institutions, limited to cash and short-dated US government obligations, and are segregated from other accounts of the company, including general corporate funds.”

Going public?

USD coin (USDC) can be used outside the crypto sphere. While it can, like other stablecoins, be used as a safe, secure, stable and private method of purchasing crypto on exchanges, it can also be used in the real world. For instance, in March 2021, Visa announced that people would be able to settle transactions on its system using USDC.

This came ahead of Allaire’s announcement that Circle would become the first stablecoin owner to operate on the New York Stock Exchange. This would happen, Allaire said, once Circle had carried out a merger with Concord Acquisition Corp, a publicly traded special purpose acquisition company, in a deal that would see Circle valued at $4.5bn.

In a statement in July 2021, Allaire said: “While this transaction, and the transformation of Circle into a global, publicly listed company is exciting in and of itself, it is merely a marker in our journey to transform the world’s economic system using internet-native technologies. 

“We have a long way to go in pursuing our mission, and are incredibly grateful to each and every one of you for your support and engagement with Circle. We are also thrilled to partner with Concord’s executive and investment team, drawing on their decades of operating experience growing financial services businesses around the world.”

In April 2022, BlackRock announced a minority investment in Circle. BlackRock became the primary administrator of the network’s USDC cash reserves, with assets invested in short-term US treasuries.

However, as of 9 August 2022, the merger that would send Circle public under the ticker name CRCL had yet to take place. But Circle Internet Financial, the backer of the USDC, says it remains committed to its now $9bn merger with Concord Acquisition.

Some final notes

USDC price chart
The USDC price history is pretty stable – Credit: Currency.com

There are a couple of other things to note about USDC.

First, since it is a stablecoin, any USD coin price prediction is somewhat irrelevant. Since the coin is pegged to the dollar, that means that, at most, there will only be very minor fluctuations in the coin’s price. This means that whether it’s 2022, 2025, or a USD coin price prediction for 2030, the price should always be the same – $1. Any fluctuations will likely be in fractions of a cent.

Second, as of 9 August 2022, there were 54.21 billion USDC in circulation


How many USD coin coins are there?

As of 9 August 2022, there are 54.21 billion USDC in circulation

Who created USD coin?

USDC was created by Jeremy Allaire and Sean Neville in 2018.

Is USD coin legit?

It is, but it is worth noting that there may be some ambiguity surrounding the crypto’s reserves. As ever, you will need to do your own research, remember that currencies can collapse, and never invest more money than you can afford to lose. 

Further reading

The material provided on this website is for information purposes only and should not be regarded as investment research or investment advice. Any opinion that may be provided on this page is a subjective point of view of the author and does not constitute a recommendation by Currency Com or its partners. We do not make any endorsements or warranty on the accuracy or completeness of the information that is provided on this page. By relying on the information on this page, you acknowledge that you are acting knowingly and independently and that you accept all the risks involved.
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