What is USDC?

In cryptocurrencies, assets range from highly volatile to stable. While Bitcoin and Ethereum are known for sharp price swings, stablecoins form a distinct category of digital assets designed to maintain steady value. USD Coin (USDC) stands out as one of the most widely used stablecoins, pegged to the US dollar.

What is USDC?

USD Coin (USDC) is a stablecoin linked to the value of the US dollar. Unlike other cryptocurrencies, its price stays relatively steady, as it’s built to maintain a 1:1 ratio with the USD.

This digital asset emerged through a partnership between a major crypto exchange and the fintech firm Circle in the late 2010s via the Centre Consortium. Since its 2018 launch, USDC has become the world’s second-largest stablecoin by market capitalization, achieving significant trading volumes.

Centre initially launched USDC on Ethereum using smart contracts. Over time, USDC expanded to other blockchains—such as Solana, TRON, Polygon, and Avalanche—making it accessible to a broad cross-section of the crypto ecosystem.

How Does USDC Work?

USDC operates as a fully reserved stablecoin, meaning each token in circulation is backed by an equivalent amount of US dollars or USD-denominated assets.

Here’s how it works: Circle holds accounts with USD and USD-denominated assets like Treasury bonds. When someone buys USDC, Circle sets aside an equal amount of fiat in reserves before issuing (“minting”) new USDC tokens. Conversely, Circle destroys (“burns”) USDC when investors redeem their tokens for USD.

For transparency, Circle issues regular reserve updates and reports to the US Securities and Exchange Commission (SEC). The company engages reputable auditors to verify USDC reserves, building strong trust in the stablecoin.

What are the Uses of USDC?

USDC serves different roles than volatile cryptocurrencies. While BTC and ETH traders typically seek profit from price swings, USDC is applied in a wide range of practical scenarios.

First, USDC can help protect against inflation. In countries facing inflation or hyperinflation, USDC offers a way to preserve purchasing power. While not legal tender, USDC provides easy exposure to the US dollar’s value.

Second, USDC is widely used in crypto trading. BTCUSDC and ETHUSDC pairs are increasingly common on trading platforms. As USDC’s market cap grows, more exchanges use it as a base asset for cross-crypto trades and price quotes. USDC’s liquidity and stability simplify and clarify conversions between cryptocurrencies.

Third, USDC is used for risk management. Traders looking to exit high-risk positions often move assets into low-volatility tokens like USDC. Thanks to its stable price, investors can lock in gains or limit losses on their digital assets.

USDC also plays a role in digital payments. More merchants are accepting USDC thanks to its price stability. Research shows a meaningful share of users in different regions rely on stablecoins for everyday transactions, and major payment networks are piloting USDC-based payment solutions.

Remittances represent another use case. If both sender and recipient have internet access and crypto wallets, they can send secure cross-border payments using USDC.

Lastly, USDC is integral to decentralized finance (DeFi). Many DeFi apps on blockchains like Ethereum use USDC to reduce volatility and boost liquidity. Different protocols accept USDC deposits for decentralized trading and other financial services. API integration allows developers to easily embed USDC in their products.

Benefits and Drawbacks of USDC

Like any crypto asset, USDC offers advantages and risks investors must assess before adding it to their wallets.

On the plus side, USDC delivers minimal price volatility. Throughout its history, USDC has closely tracked the US dollar at a 1:1 ratio. High liquidity and broad access are also key strengths. As the second-largest stablecoin, USDC is available on major centralized exchanges and DeFi platforms. Its high daily trading volumes mean buyers and sellers can readily exchange USDC for fast crypto settlements.

USDC is also backed by US assets and issued by regulated US crypto firms. Issuers publish transparent operational reports, and Circle partners with independent auditors to verify reserves. USDC’s presence spans multiple blockchains, including Ethereum, Solana, and Polygon, making it highly usable in Web3 applications. Its API supports straightforward integration for developers worldwide—including those outside the US.

However, USDC does face several drawbacks. Regulatory uncertainty remains a key risk. As stablecoins become more influential, governments are developing new rules for the crypto sector. USDC and similar stablecoins may face tighter scrutiny as national and international regulations evolve.

USDC also lacks federal insurance. The US government does not issue USDC, so it is not covered by federal deposit insurance such as from the Federal Deposit Insurance Corporation (FDIC). As the Federal Reserve and other agencies test government-backed stablecoins (Central Bank Digital Currencies), USDC could face more competition.

Most USDC reserves are held in Treasury bonds rather than cash. Circle’s official attestations show the majority of reserves are in USD-denominated Treasuries. Though Treasuries are low-risk and yield stable returns, they are not instantly convertible to cash. Circle’s heavy reliance on bonds raises questions about its response to a large wave of USDC redemptions.

Finally, USDC is exposed to US dollar inflation. Its purchasing power depends on dollar strength. If the USD loses value in forex markets, USDC will also depreciate.

USDC versus USDT: What's the Difference?

Tether (USDT) is the oldest reserve-backed stablecoin and remains the largest by market capitalization and daily trading volume. Like USDC, USDT maintains a 1:1 peg to the US dollar and operates across several blockchains including Ethereum, TRON, and Algorand.

The main difference: USDT’s issuer is not US-based. Tether Limited is a subsidiary of a conglomerate headquartered in Asia. As a result, USDT does not follow the same US regulatory standards that USDC upholds.

Despite USDT’s long crypto market tenure, questions persist about Tether Limited’s reserves. Tether releases less detailed reports than USDC, creating uncertainty about the assets backing each USDT token. Theoretically, every USDT should be matched by a US dollar in the bank, but its transparency does not match USDC’s standards. By contrast, Circle routinely publishes asset reports and affirms compliance with US federal guidelines.

Conclusion

USD Coin is a vital asset in the crypto ecosystem, bringing stability to digital markets. With its peg to the US dollar, transparent reserve management, and broad blockchain availability, USDC has become a trusted stablecoin for uses ranging from BTCUSDC and ETHUSDC trading to remittances, DeFi, and digital payments.

API integration makes USDC accessible to developers and users worldwide—including outside the US—driving global adoption. Despite ongoing risks from regulatory changes and the lack of federal protection, USDC remains central to bridging traditional finance and decentralized innovation, providing a practical way to participate in the crypto economy with reduced volatility risk.

FAQ

How do I obtain a Bitcoin API key?

Sign up for an account on the platform, go to the API management section, create a new API key with the necessary permissions (read, write), then copy and securely store the key for use in your applications.

What are the differences between BTC/USDC and ETH/USDC trading pairs?

BTC/USDC reflects the volatility of Bitcoin, featuring a higher price per unit and lower transaction volume. ETH/USDC tracks Ethereum, which is priced lower with greater trading activity. BTC leads in market capitalization, while ETH offers more diverse trading opportunities.

How do I authenticate and use the API for trading BTC and ETH?

Get your API key in your account dashboard, configure authorization headers with the key and secret, use HTTPS for API calls, sign requests with timestamps for security, and test in sandbox mode before live trading BTC and ETH pairs.

What is USDC and why is it used in BTC/USDC and ETH/USDC pairs?

USDC is a stablecoin pegged to the US dollar. It is used in BTC/USDC and ETH/USDC pairs to provide price stability in crypto trading, reduce volatility, and streamline settlement.