After Bitcoin's wild run, some investors want more stable cryptocurrencies. Enter 'stablecoins' —tokens that are backed by real-world assets. The US dollar currency (USDC) is one of many currencies that are worth the same as the US dollar.
In this article, we will discuss:
What is US Dollar Currency?
The US dollar coin is a stable coin that claims to have a 1:1 value with the real US dollar. Essentially, this means that one US Dollar Coin (USDC) should equal one real US Dollar, providing much-needed stability in the market. Originally an ERC-20 token, it has expanded to the Algorand and Solana blockchains.
Did you know?
Circle is behind CENTER, a consortium that creates frameworks and standards to improve the conventional adoption of stablecoins.
Who created the US dollar currency?
US Dollar Coin was created as a joint initiative of Coinbase, the hugely popular cryptocurrency exchange, and Circle, a Boston-based financial encryption company. Circle is supported by several high-profile companies, including Goldman Sachs.
Circle started in 2013 as a way to send money quickly and easily. Since then, he has expanded into cryptocurrency – raising millions in venture capital and acquiring the cryptocurrency Poloniex.
USDC: A Brief History
- May 2018 – Circle Announces US Dollar Coin, Funded by $110 Million in Venture Capital Financing
- September 2018 – US Dollar Coin officially released
- December 2018 – The token is ranked 5th by total market cap according to CoinMarketCap
- January 2019 – The Center publishes a Grant Thornton statement attesting to the $251 million held by Circle for the USDC.
- May 2019 – USDC open for trading in 85 countries.
- March 2020 – DAI stablecoin accepts USDC as collateral. More than $10 million USDC minted per day amid the first days of the coronavirus pandemic.
- June 2020 – Usage takes off amid the decentralized finance (DeFi) boom.
- September 2020 – USDC partnership with Algorand .
- October 2020 – In October, the USDC's market capitalization increases to $2,6 billion. The USDC partners with Stellar and Solana.
- November 2020 – Bitcoin's bull run begins, bringing another cash run to the USDC.
- January 2021 - As of January, $4,7 billion is in circulation.
What's so special about the USDC?
The US dollar coin is neither the first nor the most popular US dollar-backed currency. That title belongs to Tether. But Tether is under intense scrutiny over the state of its finances. He once claimed to have an actual dollar in the bank for every Tether in circulation, but an investigation by the New York Attorney General caused him to drop that claim. The investigation is still ongoing.
This has led to an increase in other US dollar-backed stablecoins that have more transparent financing and auditing processes. This includes Gemini Dollar, True USD, Paxos and US Dollar Coin (USDC).
While the USDC may not be entirely unique compared to these competitors, here's why it stands out from other cryptocurrencies:
- Regulated: The parent of the USDC is a US registered currency services company. This means that it is regulated by the government's Financial Crimes Enforcement Network (FinCEN), which fights money laundering.
- Audited: USDC is audited by Grant Thornton, one of the 10 largest accounting firms in the world.
- Fast: It can take a long time to send US dollars to people and institutions when banks are involved. The USDC offers the stability and convenience of the US dollar with the speed of cryptocurrency transactions.
How is US dollar currency produced?
US dollar coin is not mined like many other cryptocurrencies. It is available as Ethereum ERC-20, Algorand ASA and Solana SPL tokens that can be purchased in US Dollars on several major exchanges. Circle says there is a total supply of four billion tokens in circulation right now.
How does the US dollar currency work?
Once a customer meets Know Your Customer (KYC) identity requirements, they can link their bank account and make a wire transfer in US dollars. This money is then converted into USDC, and the customer can use an exchange to exchange it for other cryptocurrencies.
The customer can also convert the USDC back into US Dollars, which will then be transferred back to their bank account.
What can you do with the US dollar currency?
US Dollar currency can be traded on Poloniex and Coinbase (the exchanges of the parent companies of the USDC) and on other major exchanges such as Binance and Huobi.
You can also use USDC in a variety of decentralized financial protocols. You can, for example, deposit with BlockFi, a lending company that offers interest on depositing USDC (among other currencies).
USDC is normally held as a stable asset by cryptocurrencies, as are other stablecoins such as Tether and DAI . Stablecoins are useful for traders who want an easy way to trade cryptocurrencies for US Dollars. As the USDC represents a US dollar, it is a legal way to trade more volatile currencies such as Bitcoin.
Recent Developments
In 2020, USDC expanded to other blockchains. Ethereum, your blockchain native, it is often slow and surrounded by bottlenecks. Thus, the Center entered into partnerships with Algorand, Stellar and Solana, rival blockchains, to expand the market.
In these blockchains, the USDC does much the same. Smart contracts in Algorand may require USDC to feed them, for example.
In November 2020, Circle announced that it is working with the United States government to divert aid to Venezuelan health care workers through the country's exiled government being in exile. The United States Treasury and the Fed they give money to their acting president, Juan Guaidó. Guaidó's government then uses that money to mint USDC, which it then sends to Airtm, a cryptocurrency exchange. Airtm then sends these funds to Venezuelan health workers in the form of its own US dollar stablecoin, AirUSD.
Governments have sought to regulate stable currencies, especially as central banks work in their own digital currencies. Privately issued stablecoins angered regulators. An October 2020 report from the G7 nations highlighted the regulatory and oversight challenges surrounding stablecoins, including market integrity, data privacy and terrorist financing. They also undermine central bank sovereignty, argued the G7, as they rival their ability to influence the money supply.
1/ Breaking major news from the US Treasury OCC, the largest US banking regulator (@USOCC), with new guidance allowing US banks to use public blockchains and dollar stable coins as a settlement infrastructure in the US financial system. https://t.co/gQFWISWUnc
— Jeremy Allaire – jda.eth / jdallaire.sol (@jerallaire) January 4, 2021
However, in January 2021, the Office of the Comptroller of the United States of the Currency (OCC) issued a guidance stating that banks can use blockchains and stablecoins to facilitate payments. Unsurprisingly, Circle Co-founder and CEO Jeremy Allaire was elated, tweeting that it was "a big win for encryption and stablecoins."
The future
Traditional investors are suspicious of cryptocurrency for two main reasons: lack of regulation and volatility. This new wave of stablecoins seeks to change all that, becoming a gateway to well-established institutions.
The USDC parent is not afraid to say that the currency is for those who wish to move medium to large values. By becoming a more attractive way for institutional investors to get involved, stablecoins like the USDC could help make cryptocurrencies more common.