USDC: The Digital Dollar for the Global Crypto Economy | by Coinbase | August 2022

TL;DR: Coinbase believes crypto will be part of the solution to creating an open financial system that is both more efficient and fairer. We co-founded the Center Consortium in 2018 to invest in the development of USDC, and since then it has become the second largest stablecoin by market capitalization. We are convinced that USDC will be a key component of a new financial paradigm, as it helps to bridge the gap between the worlds of crypto and fiat.

Stablecoins provide a bridge between the traditional financial system and the crypto-economy, allowing fiat currencies to exist in a form that can move more freely and efficiently on blockchains. Unlike conventional payment methods, stablecoin payments require no centralized intermediary. We believe that stablecoins – USDC, most importantly – will be the foundation for a new era of innovation in financial services.

Why USDC?

Back in 2018, we co-founded the Center Consortium to create the most trusted and recognized digital dollar. Stablecoins have many uses, from trading in digital asset markets to making payments. We launched the USDC as a way to simplify these processes so that everyone can participate, and continue to drive toward our goal of financial freedom. Since then, we have built a suite of supporting products and systems to enable:

The value of many cryptocurrencies can fluctuate from minute to minute, so holding an asset like USDC gives buyers and sellers the stability and confidence they need in times of volatility. The stability of USDC comes from the fact that it is backed by one US dollar or asset of equivalent real value held in accounts at US regulated financial institutions ¹— the defining feature of a fiat-backed stablecoin (as opposed to a crypto-backed or algorithmic stablecoin). These accounts are certified and publicly confirmed by an independent accounting firm. The market capitalization of USDC increased from $28 billion to $54 billion between August 2021 and August 2022², demonstrating confidence in USDC as a high-quality liquid asset.

As an active member of the Center Consortium, Coinbase is continuously developing our USDC product suite to expand the USDC ecosystem for our retail, institutional and developer customers.

The strength of USDC’s link to the US dollar, backed by high-quality reserves and with transparent disclosures, makes it a practical option for users who want to remain active in the crypto market during a downturn. We have already seen significant use of USDC for interconnected trading with other digital currencies on centralized exchanges, as well as use in many DeFi protocols, where USDC’s reliability makes it an attractive security element. The top four stablecoins, including USDC, account for nearly 80% of centralized exchange trading volume.³ Looking to the future, there is even more untapped potential for stablecoins like USDC in mainstream commercial use:

• Increased financial inclusion — Globally, there are 1.7 billion people without access to a bank account.⁴ In the US, 5% of adults are unbanked and 13% underbanked.⁵ USDC and other stablecoins have the potential to expand access to financial services through reduced costs and increased efficiency. All that is required to participate in the crypto economy is internet access via smartphone or computer.
• Faster and cheaper global money transfer — Transfers for stablecoins such as USDC can be settled in under 30 minutes or less, while international transfers can take several business days. Cross-border transfers can also be prohibitively expensive using conventional methods. Coinbase supports cross-border transfers of digital assets on our platform, including USDC (and other stablecoins). These cross-border transfers can be made at far lower costs than the global average cost of cash transfers, which is closer to 7%⁶
• Approach to web3 — We believe that USDC and other stable coins will play an important role as the pioneer in the new web3 digital ecosystem, which will give users more control over their information, data and digital footprints. DeFi protocols are emerging as part of this decentralization and have the potential to improve financial efficiency in areas such as commerce, insurance, automatic payments, savings, lending and borrowing.
• Payments to sellers — Stablecoin payments, including those for USDC, can be made on a public blockchain that enables peer-to-peer transfers and users can settle transactions almost instantly without an intermediary bank or financial institution to facilitate. The flexibility and low cost of USDC payment methods can benefit consumers and businesses by increasing competitive pressure on existing systems.

USDC for retail customers

Customers can feel confident in the value of their digital assets and have the ability to earn rewards on their USDC held on Coinbase. Fast processing and low transaction fees make USDC an ideal option for sending money anywhere in the world. USDC is being adopted across multiple chains, promoting more growth for application development. It is quickly becoming the standard stablecoin, not only on Ethereum where it was originally launched, but across the blockchain ecosystem from layer 1 networks to sidechains to layer 2 networks. When users buy USDC on Coinbase, there is no fee and they can earn rewards on their holdings.

USDC for institutions

Digital stablecoins such as USDC have quickly become fundamental assets for trading firms and market makers. Stablecoins allow market participants to price assets in a common currency, settle almost instantly, and keep assets on-chain with less exposure to volatility. Coinbase Institutional enables firms to use USDC to participate in global cryptoasset markets. We offer multi-chain support on Coinbase Exchange, no fees for USDC custody on Coinbase Prime, easy acquisition and one-to-one conversion between USD and USDC on both platforms.

USDC for developers

USDC has quickly become the most popular stablecoin in the web3 ecosystem with approximately 30% of the total supply spread between DeFi platforms and decentralized exchanges. Coinbase enables developers to use USDC for their dapps, services and protocols with multi-chain support, no custodial fees and a frictionless acquisition path. We are actively expanding our developer tools and see USDC as a key offering for dapps that want to secure stable revenue, which is why we have enabled acceptance of USDC via Coinbase Commerce and conversion of USD to USDC via Coinbase Pay.

We are convinced that USDC and stablecoins built with the same framework can be the basis for innovation in a new era of financial services. Visit coinbase.com or see our stablecoin whitepaper for more information on USDC. To start using a more efficient form of dollars, log into your Coinbase.com, Coinbase Prime or Coinbase Exchange account. If you are an institutional customer, you can also see our USDC overview documentation for Coinbase Prime and Coinbase Exchange.

1 https://www.centre.io/usdc-transparency

2 Coingecko, USDC Market Cap Chart.

3 Data taken from CryptoCompare, as of 30 June 2022

4 a16z, cryptostat (May 17, 2022)

5 Board of Governors of the Federal Reserve System, Report on the Financial Well-Being of US Households in 2020, (May 2021)

6 BIS, The journey so far: making cross-border remittances work for financial inclusion (15 June 2022)