USD Coin (USDC) is a digital currency that is fully backed by U.S. dollar assets. USDC is a tokenized U.S. dollar, with the value of one USDC coin pegged 1:1 to the value of one U.S. dollar. The value of USDC is designed to remain stable, making USDC a stablecoin.
Stablecoins are commonly backed by reserve assets like dollars or euros to achieve price stability.1 The price stability of USDC contrasts sharply with the notorious price fluctuations of other cryptocurrencies like Bitcoin and Ethereum.
Despite its name, it is important to note that USDC is not issued or backed by the U.S. government. USDC is an open-source project, meaning that anyone can view and contribute to the project's code.
Keep reading to understand more about USDC, including how it works and the various use cases for the digital currency.
USD Coin (USDC) is a digital currency that is fully backed by U.S. dollars or dollar-denominated assets like U.S. Treasury securities. USDC's reserve assets are held in segregated accounts with regulated U.S. financial institutions. The accounting firm Grant Thornton oversees these segregated accounts and provides monthly attestation reports.
You may be wondering about how USDC maintains the 1:1 peg with the U.S. dollar. If you initiate a transaction to buy one USD Coin using fiat currency, then that fiat currency is deposited and stored as one U.S. dollar and the new USDC is minted. If you sell a USD Coin in exchange for fiat currency, then the USDC is burned when the fiat money is transferred back to your bank account.
USDC is compatible with several blockchains, including:
USD Coin is managed by Centre, a consortium co-founded by the cryptocurrency exchange Coinbase (COIN) and Circle, a financial technology company. Centre aims to change the global financial landscape by connecting every person, merchant, financial service, and currency worldwide.
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USD Coin (USDC): Definition, How It Works in Currency, and Value
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