Here's what you need to know about USD Coin (USDC), one of cryptocurrency exchange Coinbase's stablecoin offerings – we'll tell you everything from what a stablecoin is, to how you can access it.
What is Coinbase?
Coinbase is a publicly traded cryptocurrency exchange platform. As a company, it hopes to provide a fairer, more accessible, and more efficient way to access and trade cryptocurrency, via a platform that's both secure and easy to use for anyone.
What is a stablecoin?
Put simply, stablecoins are digital money. The 'stable' part comes from their prices being pegged to a recognized reserve asset (the US dollar or gold, for example) – this then reduces volatility compared to other cryptocurrencies, such as bitcoin.
Because stablecoins are far less volatile, they are better suited to day-to-day commerce and transfers where stability is important.
What is USDC?
USD Coin (USDC) is a type of stablecoin, underpinned by one key rule: 1 USDC is always worth the same as US$1, because it's pegged to the US dollar.
USDC is backed up by dollar reserves that are at least equal to the USDC in circulation. These reserves are held in transparent, segregated accounts in regulated financial US institutions.
What's more, the currency operates on the Ethereum blockchain, the leading smart contract platform and one that is well supported by developers. It also enables speedy transfers (they can be completed in under an hour), and comes without the costs associated with traditional banking and transfer methods.
Back in 2018, Coinbase co-founded the Centre Consortium to develop its USDC stablecoin, and it has since become one of the most popular ones out there: its market capitalization has grown by 150 times in three years. USDC also powers many innovative, decentralized finance applications right now.
What are the pros of USDC?
The fact that USDC is always redeemable on a one-to-one basis makes it far more stable than most cryptocurrencies you'll come across. Cryptocurrencies, such as bitcoin, are usually associated with volatility and large fluctuations, with values that can vary greatly depending on a variety of external factors.
However, a stablecoin such as USDC offers a safer way to trade in and hold cryptocurrency. It's an attractive option for those who are keen to hold cryptocurrency even when the market is in turmoil – as it has been as of late – but don't want to expose themselves to heavy losses.
It's not difficult to get started either. You don’t need a bank to hold USDC, because you can sign up to an exchange like Coinbase instead, and USDC can easily be used in online transactions too. Stablecoins also offer ways to earn interest on your holdings, usually at a higher rate than you would get from a bank.
Owners of USDC will also be able to interact with new decentralized applications (dApps), allowing access to trading, insurance, saving, lending and borrowing through this trusted form of digital currency. Check out Coinbase Wallet for access to DeFi here.
Is USDC easily accessible?
You can convert US dollars to USDC quite simply by creating or signing in to your Coinbase account. As part of its mission to increase economic freedom in the world and in order to make USDC more available and accessible, Coinbase is now waiving commission fees when customers buy or sell USDC via any fiat currencies on the platform – from Australian dollars to South African Rands.*
Additionally, users can earn 1% APY on their USDC holdings. Coinbase will distribute rewards for the days you have a balance of at least $1 of USDC on Coinbase every month, meaning the higher your USDC balance the more rewards you will earn. **
Coinbase's research shows USDC has been more readily adopted in the US, but the company is hoping to increase its use throughout the globe. Currently three times more USDC is bought with US dollars versus non-US dollar currencies.
Coinbase believes this is likely because users outside the US have to pay fees to convert their local currency into USDC which creates a "barrier to broader international adoption". Now though, that's no longer an issue.
* No commission fees attributed to Coinbase will be charged until further notice. However, spread, and processing fees charged by third party processors, will continue to apply. This feature may not be available to all regions.
** See terms for USDC APY
Disclaimer
Cryptocurrency is unregulated in the UK. The value of investments can go down as well as up. Profits may be subject to Capital Gains Tax. See terms for USDC APY.
