USDC

USDC is digital money that is meant to always be worth exactly one US dollar. It is issued by the American company Circle. Anyone who buys a USDC gives Circle a real dollar and receives in return an entry in a public database. This database does not run on a single company server, but is distributed across thousands of computers worldwide. The advantage: you can send USDC to someone on the other side of the world in seconds, without a bank standing in between. Its value remains stable, unlike Bitcoin, whose price fluctuates strongly.

A stable anchor in a volatile market

Most cryptocurrencies have a practical problem: their price moves too much. Nobody likes paying for lunch with a currency that could lose ten percent of its value by evening. This is exactly the gap filled by so-called stablecoins, digital coins with a fixed value peg. Alongside Tether, USDC is one of the two major representatives of this group.

In practice, USDC mainly serves as a temporary parking spot. Anyone who sells Bitcoin but doesn’t want to move the money back to a bank account converts it into USDC. The value is then secured, but the money stays within the crypto system and remains immediately usable. A bank transfer would take days, while a conversion into USDC takes seconds.

The trust aspect is also important. Circle is a US company that submits to rules set by financial regulators and regularly publishes reports on its reserves. For this reason, USDC is considered by banks and large investors to be the more reputable of the two major stablecoins. In 2025, Circle took the step of going public, which brought the topic out of the crypto niche and into mainstream financial news.

What lies behind the dollar backing

The principle is simple: for every USDC in circulation, a real dollar is held in reserve. This reserve consists mainly of short-term US government bonds and cash in bank accounts. Government bonds are loans to the state, which are considered particularly safe. Auditors check monthly whether the total really adds up.

Issuance and redemption run through Circle itself. If a customer deposits one million dollars, Circle creates one million new USDC. If someone redeems USDC, these are destroyed and the dollar is paid out. This keeps the amount in circulation always equal to the backing. This process of creating and destroying is known in the industry as minting and burning.

The price of exactly one dollar arises from this promise. If USDC briefly drops to 99 cents on a trading platform, buying immediately becomes worthwhile, because it can be redeemed at Circle for a full dollar. This mechanism pulls the price back up. It failed to work once: in March 2023, 3.3 billion dollars of the reserves were held at the collapsed Silicon Valley Bank, and USDC briefly slipped to 87 cents. After the bank was rescued, the price returned to normal.

USDC in the news and in payments

In everyday life, USDC is mostly encountered by people trading cryptocurrencies. On trading platforms like Coinbase, it is a standard currency in which prices are quoted. Payment service providers are also increasingly using it, for example for international transfers. A traditional international bank transfer often costs several euros in fees and takes days, while a USDC transfer costs mere cents.

In business news, USDC usually comes up in connection with regulation. The EU, with its MiCA regulation, has for the first time established fixed rules for such coins, and in the US there has been a dedicated stablecoin law since 2025. Circle prepared for this early on and uses exactly this to court banks as customers.

A common misconception: USDC is not a bank account. There is no state deposit insurance like the 100,000 euros per account guaranteed in the EU. If Circle goes bankrupt or the private access key to the wallet is lost, the money is gone. Being stable in value therefore does not automatically mean being safe in storage.