USD Coin (USDC)
USD Coin or USDC is a fully-backed digital currency in U.S. dollar assets. USDC is a tokenized version of the U.S. dollar with the value of one USDC coin pegged as close to the value of one U.S. dollar as it can get. The value of USDC is set to be stable making USDC a stable coin.
Stable coins are often collateralized by reserve assets such as dollars or euros in order to establish price stability. The USDC has a vastly more stable price compared to most other cryptocurrencies including notorious volatile players such as Bitcoin and Ethereum.
Read on to learn more about USDC including its working and potential applications for digital currency.
Key Takeaways
USD Coin (USDC) is a stable coin that is backed by U.S. dollars and U.S. Treasury instruments.
The USDC Circle Reserve Fund is held at The Bank of New York Mellon and is managed by BlackRock.
Cash is held in segregated accounts with U.S.-regulated financial institutions.
The U.S. government does not issue USDC. penny, nickel, dime, quarter, digital dollar, commercial money
Understanding USD Coin (USDC)
USD Coin (USDC) is a stable coin, issued and fully backed by U.S. dollars or dollar-denominated assets such as U.S. Treasury securities. It holds cash assets in segregated accounts with regulated U.S. financial institutions and holds the reserve portfolio at the Bank of New York Mellon.
Circle, the issuer of USDC, maintains the 1:1 peg with the U.S. dollar by holding an amount of cash or cash equivalents equal to the amount of USDC circulation. So, if you initiate a transaction to buy one USD Coin using $1, then that dollar is deposited and stored, and you hold 1 USDC. If you sell 1 USDC in exchange for $1, the USDC is burned (sent to a wallet with no access keys) when the
These segregated accounts are managed by the accounting firm Deloitte and attestation reports are provided month
USD Coin was administered by Centre, a joint venture formed by the creators of the crypto exchange Coin base (COIN), and Circle, a technology financial firm. The venture dissolved, and now Circle is exclusively liable for the product. USD Coin wants to alter the world’s landscape for finances by connecting everybody, merchant, financial service, and currency on earth.
Advantages and Disadvantages of USD Coin
Benefits
Low volatility
Completely backed by US-regulated reserve assets
It can be used as a hedge against inflation
Cons
No price appreciation
Not immune to U.S. dollar price inflation.
American paper money comes in seven religious group $1, $2, $5, $10, $20, $50, and $100. The United States no longer matter bills in larger religious group such as $500, $1,000, $5,000, and $10,000 account. But they are still legal tender and may still be in movement.
Use Cases for USD Coin
As a price-stable digital asset, USDC can be used in several ways Investors exposed to other cryptocurrencies can reduce their portfolios’ volatility by strategically buying a stable coin like USDC. Owning USDC during periods of significant market volatility can help to stabilize a portfolio’s value.
Pricing in fiat money: Digital assets on cryptocurrency exchanges can be priced in fiat money by using a stable coin like USDC.
Stable price-pegging: The stability of the price of USDC allows the stable coin to represent equity ownership or fund investments. USDC can also be used to represent liabilities or debt.
Remittances: USDC can be used to send funds across borders. Recipients can store USDC without using a bank account or being concerned about price volatility.
U.S. dollar exposure: Non-U.S. investors looking to gain exposure to the U.S. dollar can add USDC to their cryptocurrency investment portfolios.
Hedge against inflation: Non-U.S. investors concerned about inflation of their local currency can hold a stable coin like USDC to help protect the value of their money.
Global crowdfunding Raise money from investors and donors anywhere in the world by soliciting digital currency startups and nonprofits alike. Raise money in a form of a stable coin, such as USDC, ensuring the value of money raised does not fluctuate with time.
Blockchain interconnectivity: As USDC is interoperable with various self-sovereign blockchains, USDC can provide an opportunity for payment systems and applications to be interconnected across blockchains.
Is USD Coin a Good Investment?
It was created for the U.S. dollar price-stabilized coin with an investment approach.
Does USDC always equal one dollar?
A USDC can maintain this price of a $1 through its holding fiat currency equal in the amount that exists in the circulating supply. Its value is pegged within $0.0001 increments though.
What does a USD Coin Sell for?
A USD Coin is typically valued a little above $1 (for example, $1.0001 or $1.0003), but for the most part, it has been steady since mid-2020.
The Bottom Line
USD Coin is a stable coin that is fully backed by a reserve of U.S. fiat currency. For every USDC in existence, there is one dollar held in reserve. But USDC’s price moves many times per day (sometimes by the minute), as much as $0.0006. That’s a lot smaller than most other cryptocurrencies, but it shows that even though the coin is relatively stable, it isn’t a 1:1 peg 100% of the time.5
It’s also susceptible to external influences—when Silicon Valley Bank went under, it was reported that around 8% of USDC reserves were being held at the bank and then the coin lost its peg.
The statements opinions and analyses are the sole views of the author. Read our warranty and liability disclaimer for more information.
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