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What is USDC and what is its role in crypto?

USDC is a stablecoin pegged to the US dollar that Circle issues for payments and trading. It briefly lost its peg in March 2023 after the bank failure.

Vahe HakobyanEditor-in-chief Updated Oct 6, 20263 min readFact-checked

Illustration: World-Crypt

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How does the dollar peg work?Who issues and governs USDC?What role does USDC play?How is USDC different from related coins?What rules and risks apply to USDC?FAQ

Key takeaways

Circle controls USDC after August 2023.
Reserves and redemption aim to hold the peg, but stress can break it.
People use USDC for payments, DeFi and trading pairs.

Short answer

USDC is a dollar pegged stablecoin from Circle Internet Group. People use it for payments and trading on many blockchains.

USDC is a private token, not a central bank digital currency. Its value depends on Circle's reserves and on people trusting that they can redeem it.

How does the dollar peg work?

USDC at a glance

Pegged to: United States dollar
Revealed: May 15, 2018
Runs on: Ethereum, Base and Polygon

Circle says USDC is backed by fully reserved assets. Customers send dollars to Circle for new USDC, and holders can return USDC for dollars.

Peg
Step	Holds	Breaks
Reserves	Circle says assets back USDC.	A loss can weaken the peg.
Minting and redemption	Dollars go in for USDC, and USDC goes back for dollars.	A halt or delay can hurt confidence.

Who issues and governs USDC?

Circle Internet Group issues USDC. Centre, a joint venture of Circle and Coinbase, launched it in September 2018 and managed it until August 2023, when Circle took complete control.

Circle now sets reserve policy. In January 2023, Circle said Deloitte would audit reserve reporting.

What role does USDC play?

USDC acts as a digital dollar for payments and trading. Businesses use it for cross border payments, remittances and merchant payouts.

Visa said in 2021 that it would settle transactions in USDC.
In 2023, Visa ran a pilot to move USDC on Solana to Worldpay and Nuvei.
The UNHCR ran a 2022 pilot to send USDC cash aid to displaced Ukrainians.

USDC is a stablecoin, so its goal is a steady dollar value. Bitcoin has no issuer and no reserves. Tether Limited issues Tether, and Tether says its reserves back it.

USDC, Tether and Bitcoin
Feature	USDC	Tether	Bitcoin
Backing	Circle says fully reserved assets.	Tether says reserves back it.	No reserves or issuer.
Governance	Circle controls it after August 2023.	Tether Limited issues it.	No central issuer.

What rules and risks apply to USDC?

In the US, Circle operates under state money transmitter rules and federal sanctions and money laundering rules. USDC is not a government issued digital dollar, and it is not a bank deposit. The IRS treats crypto as property, so trading or paying with USDC can be taxable.

Frequently asked questions

Yes. Circle can freeze USDC addresses to follow sanctions or a legal order.

No. USDC is a private stablecoin, not a central bank digital currency.

No. Speed and cost depend on the blockchain, and a bridge can add risk.

It dropped its peg in March 2023 after reserves at Silicon Valley Bank were at risk, then regained it four days later.

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Written byVahe HakobyanVahe Hakobyan is the editor-in-chief of World-Crypt. He covers bitcoin, markets and regulation, and leads the newsroom that fact-checks every story before it goes live.

How does the dollar peg work?

Who issues and governs USDC?

What role does USDC play?

How is USDC different from related coins?

What rules and risks apply to USDC?

Frequently asked questions

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