US Dollar Coin is cryptocurrency token designed to be worth the same amount as the US Dollar. The idea is that you can move US Dollars around without the delay and costly fees that are usually associated with bank transfers.
After the wild ride of bitcoin, some investors want more stable cryptocurrencies. Enter ‘stablecoins’ – tokens that are backed by real-world assets. The US Dollar Coin is one of a flurry of new coins that are worth the same as the US Dollar.
Can it help ease crypto anxiety? We find out below.
The US Dollar Coin is a stablecoin that claims to have a 1:1 value with the actual US Dollar. Essentially, that means one US Dollar Coin (USDC) should equal one real US Dollar, giving some much-needed stability in the market.
Did you know?
Circle is behind CENTRE, a consortium that creates frameworks and standards to improve mainstream adoption of stablecoins.
The US Dollar Coin was created in a joint move by Coinbase, the hugely popular cryptocurrency exchange, and Circle, a crypto finance company based in Boston. Circle is backed by several high-profile companies, including Goldman Sachs.
Circle started in 2013 as way to send money easily and quickly. Since then, it has expanded into cryptocurrency – raising millions in venture capital and acquiring crypto exchange Poloniex.
The US Dollar Coin isn’t the first or even the most popular US Dollar-backed coin. That title belongs to Tether. But Tether is under intense scrutiny over the state of its finances. It claims to have a real dollar in the bank for every Tether in circulation, but it hasn’t fully disclosed its auditing processes so no one knows for sure.
That has led to a rise in other US Dollar-backed stablecoins that have more transparent funding and auditing processes. These include Gemini dollar, True USD, Paxos, and now US Dollar Coin (USDC).
While USDC may not be totally unique compared to those competitors, here’s why it stands out from other cryptocurrencies:
The US Dollar Coin isn’t mined like a lot of other cryptocurrencies. It is an ERC-20 token that can be purchased using US Dollars on several major exchanges. Coinbase says there is a total supply of 202 million tokens (with 201 million in circulation right now).
After a customer meets the Know Your Customer (KYC) identity requirements, they can link their bank account and make a wire transfer in US Dollars. That money is then converted into USDC, and the customer can use an exchange to trade it for other cryptocurrencies.
The customer can also convert the USDC back into US Dollars, which will then be wired back into their bank account.
The US Dollar Coin is can be traded on Poloniex and Coinbase (the exchanges of USDC’s parent companies), and on other major exchanges like Binance and Huobi.
Traditional investors are wary of cryptocurrency for two key reasons: lack of regulation and volatility. This new wave of stablecoins seeks to change all of that, becoming a gateway for well-established institutions to dive in. USDC’s parent company isn’t shy about saying the currency is for those who want to move medium to large amounts. By becoming a more attractive way for institutional investors to get involved, stablecoins like USDC could help make cryptocurrencies more mainstream.