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

Sources

Sources last checked on: June 24, 2025

Sources

Sources last checked on: June 24, 2025

Sources

Sources last checked on: June 24, 2025

Sources

Sources last checked on: June 24, 2025

Disclaimer

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Ivy GmbH or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional. We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.

Disclaimer

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Ivy GmbH or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional. We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.

Disclaimer

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Ivy GmbH or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional. We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.

Disclaimer

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Ivy GmbH or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional. We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.

READY FOR THE FUTURE OF MONEY?

READY FOR THE FUTURE OF MONEY?

READY FOR THE FUTURE OF MONEY?

READY FOR THE FUTURE OF MONEY?

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at internet speed

Ivy GmbH may provide payment services through Ivy Pay Oy, which is an Authorized Payment Institution. Ivy Pay Oy's license is granted by the Finnish Financial Supervisory Authority (FIN FSA) with the registration number 3292703-8. Your account and related payment services are provided by one or more financially regulated partner. Your funds will be held in one or more segregated accounts and the full value safeguarded in line with the Financial Supervision Act.

Money,
at internet speed

Ivy GmbH may provide payment services through Ivy Pay Oy, which is an Authorized Payment Institution. Ivy Pay Oy's license is granted by the Finnish Financial Supervisory Authority (FIN FSA) with the registration number 3292703-8. Your account and related payment services are provided by one or more financially regulated partner. Your funds will be held in one or more segregated accounts and the full value safeguarded in line with the Financial Supervision Act.

Money,
at internet speed

Ivy GmbH may provide payment services through Ivy Pay Oy, which is an Authorized Payment Institution. Ivy Pay Oy's license is granted by the Finnish Financial Supervisory Authority (FIN FSA) with the registration number 3292703-8. Your account and related payment services are provided by one or more financially regulated partner. Your funds will be held in one or more segregated accounts and the full value safeguarded in line with the Financial Supervision Act.

Money,
at internet speed

Ivy GmbH may provide payment services through Ivy Pay Oy, which is an Authorized Payment Institution. Ivy Pay Oy's license is granted by the Finnish Financial Supervisory Authority (FIN FSA) with the registration number 3292703-8. Your account and related payment services are provided by one or more financially regulated partner. Your funds will be held in one or more segregated accounts and the full value safeguarded in line with the Financial Supervision Act.