What is USDC?

USDC is a stablecoin pegged 1:1 with the US dollar, launched in 2018 by Circle and Coinbase’s Centre Consortium. It was created to deliver dollar-backed digital money on public blockchains, combining regulatory oversight with programmable settlement features.

In September 2018, USDC debuted on Ethereum, later expanding to Algorand in 2020, Stellar in 2021, and Solana that same year. In 2023, Circle launched native USDC on Arbitrum and Optimism, strengthening adoption across both centralized exchanges and decentralized applications.

As of September 2025, USDC had a circulating supply valued at about $74 billion, regularly settling hundreds of billions in monthly onchain transfers. Circle issues the token under US money transmission laws, holds a Singapore MPI license, and complies with the European MiCA framework.

How Does USD Coin Work?

USDC functions through a mint-and-burn system that ensures every token corresponds to dollars stored in reserve accounts with regulated custodians. The mechanics can be understood through several layers that describe how the stablecoin is created, circulated, and maintained across the broader ecosystem:

• Issuance: Circle mints USDC when partner institutions deposit dollars, distributing new tokens into circulation through exchanges, fintech platforms, and payment providers.
• Redemption: Authorized partners return USDC to Circle for dollars, and the tokens are burned, keeping supply aligned with verified reserves.
• Reserves: Backing consists of cash deposits and short-term US Treasuries, verified by independent accounting firms through publicly available monthly attestations.
• Token Standards: USDC exists as ERC-20 on Ethereum, SPL on Solana, and native tokens on Base, Arbitrum, Optimism, and Stellar.
• Transfers: Movement of USDC happens natively on blockchains, enabling peer-to-peer settlement without intermediaries and finality within seconds instead of banking days.
• Exchange Pairs: USDC trades against cryptocurrencies like BTC and ETH, as well as fiat currencies, providing deep liquidity across centralized trading venues.
• Custody: Institutions integrate USDC through regulated custodians, while individuals hold it in wallets compatible with the token standard of their chosen blockchain.
• Interoperability: Circle’s Cross-Chain Transfer Protocol (CCTP) enables USDC to move across blockchains without relying on wrapped tokens or third-party bridges.

Top USD Coin Use Cases

USDC supports distinct functions across trading, compliance, derivatives, and lending. The following four examples illustrate how it is actively applied today.

1. Hedge Against Bear Markets

During market downturns, traders often convert volatile crypto holdings into USDC to preserve value without exiting digital asset markets entirely. This practice provides immediate shelter from falling prices while keeping capital liquid for re-entry once risk conditions eventually improve.

Safe stablecoins like USDC also reduce the psychological strain of prolonged volatility, allowing investors to avoid panic selling or poorly timed decisions. Maintaining exposure to a stable asset enables them to hold strategic positions until better opportunities emerge across risk-on markets again.

2. Regulatory-Compliant Market Pairs in Europe

Under Europe’s MiCA framework, centralized exchanges must support transparent, fully backed stablecoins for Euro and Dollar trading pairs. Kraken, for instance, integrated USDC and EURC in 2025 to meet these requirements while expanding compliant liquidity for European traders.

This regulatory certainty encourages greater institutional participation, as counterparties can transact confidently knowing stablecoin reserves and redemption practices satisfy strict European oversight. The presence of compliant USDC pairs also prevents fragmentation that can occur when unregulated stablecoins are delisted from European venues.

3. Market Pairs on Perpetual and Derivatives Exchanges

Perpetual futures contracts frequently use USDC as collateral to minimize risk exposure from volatile assets like Ethereum or Bitcoin. Traders gain predictable margin management while avoiding collateral value fluctuations that could otherwise force liquidations during sudden market swings.

On exchanges such as Hyperliquid and Solana’s Jupiter, USDC-based contracts support deep liquidity and efficient execution for leveraged strategies. Consistent settlement denominated in stablecoins reduces funding discrepancies and makes these derivatives more attractive to professional and institutional participants.

4. Lending and Yield Opportunities

Coinbase introduced onchain USDC lending in September 2025, enabling users to earn yields up to 10.8% APY. Deposits route through Morpho vaults curated by Steakhouse Financial on Base, automatically optimizing returns across multiple lending markets.

This integration makes decentralized lending accessible within Coinbase’s app, blending DeFi yield opportunities with a familiar custodial interface. Users maintain access to their funds through smart contract wallets and can withdraw anytime, provided sufficient liquidity is available.

Pros and Cons of Using USDC

USDC supports fast, predictable transactions, but its structure carries tradeoffs tied to centralization and reliance on traditional finance. Below are its main benefits and drawbacks.

Benefits of Using USDC

USDC offers practical advantages for payments, DeFi, and settlement:

• Fast transfers: Cross-border payments settle within seconds, avoiding multi-day bank delays and eliminating high intermediary fees.
• DeFi integration: Lending platforms and decentralized exchanges rely on USDC liquidity pools, making it a backbone of decentralized finance.
• Programmability: Smart contracts embed USDC for automated loans, recurring payments, or collateral management in digital ecosystems.
• Transparency: Monthly attestations verify cash and Treasury reserves, giving users confidence in the one-to-one backing structure.

Drawbacks of Using USDC

Centralized control and fiat exposure create limitations:

• Centralization risk: Circle can freeze addresses or block redemptions under regulatory orders, unlike decentralized cryptocurrencies.
• Custodial dependency: Reserves sit in US banks and Treasuries, making stability reliant on the traditional financial system’s health.
• Limited upside: Pegging 1:1 to the dollar means no appreciation potential compared to volatile crypto assets like Bitcoin, Ethereum, and meme coins.
• Dollar exposure: Holders remain subject to US inflation and monetary policy, leaving value tied to fiat’s long-term purchasing power.

Where to Buy USDC?

USDC can be purchased across a variety of platforms, from centralized exchanges to fintech apps and decentralized trading protocols.

On centralized exchanges such as Kraken and Bybit, users can deposit fiat using bank transfers or debit cards, then trade directly into USDC. Both venues maintain liquid order books and regulatory oversight, making them reliable choices for individuals and institutions seeking stablecoin exposure.

Outside traditional exchanges, USDC is available through fintech apps like PayPal and Revolut, which integrate stablecoin wallets alongside fiat services. It can also be acquired via decentralized exchanges such as Uniswap, where users swap other tokens for USDC directly onchain.

Circle USDC vs Competitor Stablecoins

Stablecoins now account for hundreds of billions in circulation, forming the backbone of liquidity and payments across global crypto markets. Below is a comparison of USDC and four leading stablecoins, highlighting differences in size, transparency, and collateral models as of 2025:

Is USDC Safe?

USDC is fully backed by reserves equal to or greater than tokens in circulation, held as cash and short-term US Treasuries. Most reserves are managed in the SEC-registered Circle Reserve Fund by BlackRock, custodied at Bank of New York Mellon.

Circle publishes weekly reserve disclosures and monthly attestations by a Big Four accounting firm, confirming backing exceeds circulation at all times. Independent audits and deep banking relationships ensure timely redemptions, maintaining liquidity and stability even during periods of stressed financial conditions.

The Future of USD Coin

We see USDC entering its most competitive phase yet: backed by a pro-crypto Trump administration and the new GENIUS Act, Circle finally has Washington on its side. At the same time, Tether is rolling out USAT, its first fully US-domiciled stablecoin, to compete directly in regulated markets.

Our view is that Circle still holds the strongest regulatory position, pairing US oversight with MiCA licensing across Europe. That foundation makes USDC the most policy-aligned stablecoin, positioned as the digital dollar policymakers are willing to support as dollar stablecoins spread worldwide.

Looking ahead, central bank digital currencies (CBDCs) represent USDC's largest challenge, with pilots accelerating in China and Europe. A future US administration less supportive of crypto could also revive the idea, putting a digital dollar in direct competition with private stablecoins.

Final Thoughts

USDC stands as a cornerstone of digital finance, providing predictable stability and trust through reserves, attestations, and flawless blockchain interoperability worldwide.

Even with stronger competition ahead, Circle’s compliance strategy, global licensing, and infrastructure investments give USDC a durable advantage as the most policy-aligned stablecoin.