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.
What is US Dollar Coin?
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.
Who created US Dollar Coin?
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.
A brief history
- May 2018 – Circle announces US Dollar Coin, funded by $110 million in venture capital funding
- September 2018 – US Dollar Coin officially launches
- December 2018 – The token is ranked #5 by total market cap, according to CoinMarketCap
What’s so special about it
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:
- 🏛 Regulated: USDC’s parent company is a registered Money Service Business in the United States. That means it’s regulated by the government’s Financial Crimes Enforcement Network that combats money laundering.
- ⚖️ Audited: USDC is audited by Grant Thornton, one of the top 10 accounting firms in the world.
- ⚡️ Fast: It can take a long time to send US Dollars to people and institutions when banks are involved. USDC offers the stability and desirability of the US Dollar with the speed of cryptocurrency transactions.
How is the US Dollar Coin produced?
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).
How does the US Dollar Coin work?
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.
What can you do with the US Dollar Coin?
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.