7 min read
Jun 19, 2025
What is USDC? USD Coin Explained



TL;DR
USD Coin, or USDC, is a regulated stablecoin issued by Circle that is pegged one-to-one with the US dollar.
It is fully backed by cash and short-term US Treasury securities held in regulated financial institutions.
USDC maintains its peg through minting and burning tokens, arbitrage, regular audits, and regulatory compliance.
It operates on major blockchain networks such as Ethereum, Solana, Polygon, Base, Arbitrum, and TRON.
People use USDC for payments, decentralized finance, trading, fiat on and off ramps, Web3 commerce, and smart contracts.
Circle regularly publishes third-party audits to provide transparency and verify that reserves cover all tokens in circulation.
Operating under US financial regulations helps reduce risks and build confidence in USDC’s stability.
Platforms like Ivy use USDC to enable fast, affordable cross-border payments and treasury management for businesses.
USD Coin (USDC) is a regulated, fully backed stablecoin issued by Circle and pegged 1:1 to the U.S. dollar. It enables fast, secure, and transparent digital payments across blockchain networks, making it ideal for global transfers, trading, and decentralized finance, with reserves held in cash and short-term U.S. Treasuries.
Issuer
Circle
Peg
USDC (USD Coin) is a stablecoin pegged to the U.S. dollar at a 1:1 ratio.
Chains
Ethereum, Solana, Avalanche, Polygon, Base, Arbitrum and Optimism, TRON, Stellar, Algorand, NEAR. Circle has continued expanding USDC to newer chains to meet demand.
Mechanism
The mechanisms that maintain USDC’s 1:1 peg to the U.S. dollar rely on a combination of full-reserve backing, transparency, and redemption practices.
Mechanism | Role in Maintaining the Peg |
Full reserve backing | Ensures 1:1 asset coverage |
Mint/redeem on demand | Arbitrage keeps price stable |
Transparency/audits | Builds public trust |
Regulatory oversight | Reduces risk of misuse |
Full Reserve Backing
For every USDC token in circulation, Circle holds an equivalent value in reserve assets, primarily in cash and short-term U.S. Treasury securities. These reserves are held in regulated U.S. financial institutions and are not loaned out or rehypothecated, meaning USDC operates on a fully reserved basis rather than a fractional one. This ensures that each USDC can be redeemed for exactly one U.S. dollar.
Minting and Redemption
USDC is created (or "minted") when a user deposits U.S. dollars with Circle or an authorized partner such as Coinbase. An equal amount of USDC is then issued to the user’s wallet. When users want to convert USDC back into U.S. dollars, they return the tokens to Circle, which "burns" or destroys the tokens and releases the equivalent USD to the user.
This mechanism allows market participants to arbitrage price deviations: if USDC trades above $1, users can mint new USDC and sell it at a profit, pushing the price back down; if it trades below $1, users can buy it cheaply and redeem it for $1, pushing the price back up.
Transparency and Audits
Circle enhances trust in USDC’s peg by publishing regular attestations conducted by independent accounting firms. These reports verify that the value of reserve assets meets or exceeds the number of USDC tokens in circulation. This level of transparency reassures users and markets that the peg is credible and enforceable.
Regulatory Compliance
Circle is a registered Money Services Business (MSB) in the United States and adheres to strict regulatory standards. By operating within the bounds of U.S. financial law, Circle reduces counterparty and systemic risk, further reinforcing confidence in USDC’s stability.
Use Cases
Use Case | Description |
Payments & Remittances | Fast, low-cost global money transfer |
DeFi | Lending, borrowing, yield farming, collateral |
Trading | Stable pair for crypto trades, hedging, and arbitrage |
Fiat On/Off-Ramps | Seamless transition between USD and crypto |
Web3 & Digital Commerce | Used in gaming, NFTs, content, and digital marketplaces |
Business Treasury | Used for operational payments and reserve management |
Smart Contracts | Enables programmable, automated financial actions |
Financial Inclusion | Stable value storage and access to global finance in underserved regions |
Additional Resources