USD Coin, or USDC, is a type of digital dollar also known as a “stablecoin,” issued by Circle Internet Financial (Circle). Circle, founded in 2013, is a regulated technology company and licensed money transmitter based in the United States.
Digital dollar stablecoins such as USDC are very different from Bitcoin and other digital assets, which are volatile and unregulated. Known as a “fully-reserved stablecoin,” every digital dollar of USDC is 100% backed by cash and short-dated US Treasuries that are held in the custody of leading financial institutions, so that USDC is always redeemable 1:1 for US dollars. Per Circle:
Circle is subject to regulatory oversight by the US Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) and state regulators throughout the United States, including the New York Department of Financial Services, as well as the United Kingdom Financial Conduct Authority.
Circle’s financial statements are audited annually, and it voluntarily files financial reports with the US Securities and Exchange Commission.
Circle’s USDC reserves are protected by state laws and regulations, and shares and cash are held in separate accounts from the rest of Circle’s business and operations. USDC reserves are assets that belong to USDC holders, not Circle, and are wholly held in segregated accounts designated “for the benefit of USDC holders.”
Circle is not allowed to use USDC reserves for any other purpose. Unlike a bank or an exchange or an unregulated institution, Circle cannot lend them out, cannot borrow against them, and cannot use them to pay bills.
Since 2018, one of the United States’s largest audit, tax and advisory firms has issued monthly public audit reports on the size of Circle’s USDC reserve, which provide assurances that the amount of Circle’s reserves are greater than the amount in circulation each month, according to attestation standards set out by the American Institute of Certified Public Accountants (AICPA).
In the case of a Circle bankruptcy, segregated USDC reserves should remain redeemable at face value, shielded from Circle creditors, and separated from a bankruptcy estate per the protections afforded under state money transmission laws and applicable federal bankruptcy laws.
As a result, USDC is a trusted, widely accepted digital dollar. It is available 24/7 and moves at internet speed. Billions of USDC change hands every day. What makes USDC so appealing to people in countries suffering from high inflation and currency devaluation is that USDC is a stable and secure store of value, similar to gold or other precious metals, tied directly and safely to the US dollar.