USD Coin

USD Coin (USDC) is a virtual-stable coin attached to the USA dollar. USD Coin is controlled by a consortium called Centre, founded via Circle and includes contributors from the cryptocurrency exchange Coinbase and Bitcoin mining organization Bitmain, an investor in Circle. USDC is issued by a private entity and should not be confused with a central bank digital currency (CBDC).

Circle claims that every USDC is backed by a dollar held in reserve or by different “approved investments,” but they aren’t detailed. Circle site was modified from the previous “backed by US dollars” to “backed by fully reserved assets” in June 2021.

The tokenization of the USA dollar into USD Coin occurs in 3-step:

1. A customer sends US dollars to the coin provider’s bank account.
2. The provider uses a USD Coin smart contract to create the equivalent amount of USD Coin.
3. The newly minted USD coins are sent to the user, and the substituted US dollars are held in reserve.

The transformation of USD coins for US dollars follows the process listed above but is the reverse.

USDC reserves are often attested (however not audited) by Grant Thornton, LLP, and the monthly attestations can be discovered on the Centre Consortium’s internet site.

Even though USDT is more significant and adopted, USDC is usually considered the most secure alternative amongst the centralized USD-pegged stable coins because of higher transparency, expanded interoperability, and improved legal framework.

USDC was first introduced on May 15, 2018, using Circle and was released in September 2018.

On March 29, 2021, Visa announced that it might permit the use of USDC to settle transactions on its payment network.

As of December 2021, Circle states that there are 42.5 billion USDC in a move.

USD COIN AND CENTRE

The discovery of cryptographic assets and blockchain-primarily based computing has ushered in the next generation of the open internet. Still, a price-stable medium of exchange and store of the fee is lacking and badly needed for worldwide monetary interoperability to function reliably and consistently. Currencies transaction, which differs with extreme volatility, creates complexity and fragile settlement contracts compared to transacting in “tokenized fiat money” or fiat-pegged crypto assets.

A rate-stable currency, including a token pegged to the USA dollar, is critical for permitting mainstream adoption of the blockchain era for payments and helping the maturation of financial contracts built on smart contract structures, including tokenized securities, loans, and assets. There are several strategies to solving this need, spanning algorithmic reimaginations of the money supply to crypto-backed tokens to fiat asset-subsidized tokens.

Circle USDC (USD Coin) is an answer that enables clients to buy and use USDC fiat tokens for payments and to trade inside the crypto ecosystem. USDC provides a complete reserve US dollar-backed stable coin and is based on the open-source fiat stable coin framework developed and ruled by CENTRE to provide impartial oversight of Circle’s offering.

Strategic Financing and Bitmain Partnership

Bitmain is a supporter of CENTRE and USDC, and along with this new partnership, Bitmain is leading a $110M strategic funding in Circle. Current traders IDG Capital, Breyer Capital, General Catalyst, Accel, digital currency organization Pantera, and the new investor’s Blockchain Capital and Tusk Ventures participate in this financing round.

09-11 March, 2023 and Onward

On March 9, 2023, rumors spread that Silicon Valley Bank’s (SVB) investments in long-term mortgage-backed securities (MBS) were causing it to run out of cash. This caused a run on the bank, and people withdrew their money, including Circle, which makes the second-largest stablecoin in the world, USD Coin (USDC). Circle had about one-third of its cash on hand, or $3.3 billion, with SVB. This caused USDC to stop being tied to the US dollar and trade at over 12% less than its value.

As a result, the value of USDC went down from $1.00 to $0.88.

After a Federal Reserve bailout, USDC returned to its original value of $1.00 on March 13, 2023. This event calmed the fears of USDC investors and made the market steady again.

The market value of USDC has decreased from $43 billion to $32 billion (April 10, 2023).

This event showed how important it is to choose stablecoin issuers with trustworthy banking partners to lower the risk of de-pegging.