USD Coin (USDC)

Stablecoins are cryptocurrencies designed to minimize price volatility. They are often pegged to a stable asset, such as the U.S. dollar.

USD Coin (USDC) is one of the most popular stablecoins in the crypto market, currently ranking as the second largest globally

The goal behind launching USDC was to combine the stability of the U.S. dollar with the flexibility and speed of the internet for global transactions.

USDC is designed to be a stable and reliable digital dollar that can be used for various purposes, including trading, payments, and as a store of value.

What is USD Coin (USDC)?

USDC is a stablecoin, which means it is designed to maintain a value peg to other assets.

This solves many of the problems of volatility that other crypto assets may bring when being used as a store of value or for everyday transactions, or as a safe haven during periods of market volatility.

In USDC’s case, one USDC token is pegged to one U.S. dollar, and every USDC token in circulation is backed by financial assets (mainly cash and bonds).

Unlike regular US dollars, USDC does not require a bank account to be opened in particular geographic locations. This allows unbanked and under-banked folks in any country to hold a dollar-backed asset even just through a mobile phone!

Initially launched on the Ethereum blockchain in September 2018, USDC was created as a joint venture between Circle and Coinbase.

Since it is an Ethereum token, you can store it in an Ethereum-compatible wallet like Coinbase Wallet or MetaMask. Its design enables stable monetary value to move globally from a crypto wallet to other exchanges, businesses, and people without an intermediary.

It can also be found on other blockchains compatible with the ERC-20 token standard, including Algorand, Solana, Tron, and Stellar.

How does USD Coin (USDC) work?

USDC is issued by Circle and is fully backed by U.S. dollar-denominated assets, including cash and short-term U.S. Treasuries .

When someone buys USDC, new tokens are minted and added to the circulating supply. Conversely, when someone sells USDC, the tokens are burned and removed from circulation.

This mechanism helps to maintain the stable value of USDC.

To ensure transparency, Circle provides monthly attestations from an independent accounting firm to verify that the reserves held match the circulating supply of USDC

USDC Tokenization Process

Turning U.S. dollars into USDC is a process called tokenization which has three steps:

  1. The user sends USD to the token issuer’s bank account.
  2. The issuer uses a USDC smart contract to create an equivalent amount of USDC.
  3. The newly minted USDC tokens are delivered to the user while the U.S. dollars are held in reserve.

Redeeming USDC for U.S. dollars is just as easy as the tokenization process but in reverse order.

USDC has the benefits of both being a stable store of value and being programmable. The latter opens up a world of possibilities for applications and businesses.

For one, USDC transfers and payments can be made anywhere in the world at extremely low costs and in just a few minutes. Lending is made faster, cheaper, and more transparent.

On a larger scale, it makes payroll services, global crowdfunding, and donations to charity more stable and efficient.

Team Background

USDC was created by CENTRE, which is an open-source technology project powered by contributions from Coinbase and Circle.

Founded in 2012, Coinbase is a trading platform registered in the United States with a legal digital currency trading license, which has KYC and AML standards for its clients.

Coinbase participated in the project because it is in line with its mission to build an open financial system for the world.

Circle was founded in 2013 by entrepreneurs Jeremy Allaire and Sean Neville. It is an official Money Transmitter, which is a US money service business complying with federal laws and regulations.

Stablecoins governed by CENTRE are issued by regulated and licensed financial institutions that maintain full reserves of the equivalent fiat currency, such as U.S. dollars for USDC. These reserves are published in a monthly public attestation on CENTRE.io

Token Metrics:

  • Holder addresses: Approximately 34,195 active addresses
  • Maximum supply: 51.53 billion USDC
  • Circulating supply: 51.53 billion USDC
  • Inflation rate: Not applicable, as USDC is a stablecoin pegged to the U.S. dollar and does not follow traditional inflationary mechanisms.

What are the benefits of using USD Coin (USDC)?

USDC offers several benefits over both traditional fiat currencies and other cryptocurrencies:

  • Stability: USDC’s price is pegged to the U.S. dollar, which means it is not subject to the same volatility as other cryptocurrencies like Bitcoin or Ethereum. This makes it a more reliable store of value and a suitable option for payments and transactions.
  • Speed and low cost: USDC transactions are processed quickly and with lower fees than traditional financial transactions. This is because USDC operates on the blockchain, which eliminates the need for intermediaries like banks.
  • Accessibility: USDC is available to anyone with an internet connection and a digital wallet, making it accessible to those who may not have access to traditional banking services.
  • Transparency: Circle provides regular attestations to verify that USDC is fully backed by U.S. dollar reserves. This transparency helps to build trust and confidence in the stablecoin.
  • Programmability: USDC is programmable money, which means developers can use it to build innovative applications and services. This opens up a wide range of possibilities for using USDC in various contexts.

What are the risks of investing in USD Coin (USDC)?

While USDC offers several advantages, it is important to be aware of the potential risks involved:

  • De-pegging risk: Although USDC is designed to maintain a stable value, there is a risk that it could lose its peg to the U.S. dollar. This could happen due to various factors, such as a loss of confidence in the issuer or a significant change in market conditions.
  • Counterparty risk: USDC is issued by Circle, a centralized entity. This means that there is a risk that Circle could become insolvent or face other issues that could affect the value of USDC.
  • Regulatory risk: The regulatory landscape for stablecoins is still evolving. Changes in regulations could affect the use and value of USDC.
  • Smart contract risk: USDC is an ERC-20 token, which means it is subject to the risks associated with smart contracts. These risks include the possibility of bugs or vulnerabilities in the code that could be exploited by hackers.
  • Lack of FDIC insurance: Unlike deposits in traditional bank accounts, USDC is not insured by the Federal Deposit Insurance Corporation (FDIC). This means that if Circle were to fail, USDC holders could lose their funds.

What are the latest developments with USD Coin (USDC)?

USDC has seen significant growth and development in recent years. Here are some of the latest developments:

Market Growth and Expansion:

  • Market Cap Growth: In 2024, USDC’s market capitalization grew by 79%, outperforming other stablecoins like Tether (USDT). This growth can be attributed to increased regulatory clarity, blockchain scalability, and a focus on trust and transparency. This significant growth suggests a potential shift in the stablecoin market, with users increasingly favoring USDC over USDT.
  • Expansion to New Blockchains: USDC is now available on 15 different blockchains, including Solana, Arbitrum, and Base. This multi-chain approach enhances USDC’s accessibility and scalability. By expanding to multiple blockchains, USDC not only increases accessibility but also reduces reliance on any single blockchain, potentially mitigating risks associated with network congestion or failures.
  • Total Transaction Volume: USDC’s total transaction volume has surpassed $20 trillion, with $1 trillion in November 2024 alone. This highlights the increasing use and adoption of USDC for various transactions.
  • Growth of EURC: In October 2024, EURC, Circle’s Euro-backed stablecoin, became the largest Euro-backed stablecoin and surpassed $1 billion in weekly transfer volume. This demonstrates Circle’s success in expanding its stablecoin offerings to other currencies.
  • Growth on Layer 2 Solutions: The supply of USDC on Layer 2 solutions like Base and Arbitrum increased significantly in 2024. This indicates the growing adoption of USDC on these faster and more efficient networks.

Partnerships and Integrations:

  • Binance Partnership: In December 2024, Circle partnered with Binance to make USDC more accessible on the Binance platform. This partnership aims to strengthen the global digital asset ecosystem and expand USDC adoption.
  • MoneyGram and Chipper Cash: Circle’s partnerships with organizations like MoneyGram and Chipper Cash have helped drive adoption among the unbanked and underbanked, offering seamless conversions between USDC and local currencies across more than 180 countries.
  • Primer Partnership: Circle partnered with Primer to support stablecoin transactions. This partnership aims to improve services for merchants and customers who prefer stablecoin transactions.
  • dtcpay’s Shift to Stablecoins: dtcpay, a digital payments firm, discontinued support for cryptocurrencies in favor of stablecoins, including USDC. This move reflects the growing preference for stablecoins in the market.
  • Coinbase and Morpho Partnership: Coinbase partnered with Morpho to offer Bitcoin-backed loans in USDC. This partnership allows Coinbase users to borrow USDC by pledging Bitcoin as collateral.

Focus on Real-World Assets (RWAs) and Financial Inclusion:

  • Acquisition of Hashnote: Circle acquired Hashnote, a tokenization firm, in January 2025 . This acquisition aims to enhance USDC’s liquidity and bridge the gap between traditional finance and the crypto market. This move could further bridge the gap between traditional finance and DeFi, potentially leading to increased institutional adoption of USDC and other stablecoins.
  • Financial Inclusion: USDC empowers unbanked and underbanked populations, providing secure, low-cost access to digital dollars across 180+ countries.

Regulatory Developments:

  • MiCA Compliance: Circle became the first major global stablecoin issuer to comply with the European Union’s Markets in Crypto Assets (MiCA) regulation in 2024. This demonstrates Circle’s commitment to regulatory compliance and strengthens USDC’s position in the market. Circle’s compliance with MiCA sets a precedent for other stablecoin issuers and could lead to wider acceptance of stablecoins in the EU and other regulated markets.

Use Cases with Financial Institutions:

  • Nubank: Nubank users can transfer USDC to other wallets and will be increasingly able to use it in their day-to-day financial activities.
  • Lemon: Lemon facilitates the exchange between local currency and crypto, including USDC, and offers a Visa Lemon Card with Bitcoin cashback.