Coinbase’s USD stablecoin – what is it and why should you use it?

Here’s everything you need to know about USD Coin (USDC), a stablecoin offering from cryptocurrency exchange Coinbase. This handy guide includes everything you need to know – from what a stablecoin is, to how you can access it.

What is Coinbase?

Coinbase is a publicly traded cryptocurrency exchange platform. The company is hoping to provide a fairer, more accessible, and efficient way to access and trade cryptocurrency via its easy-to-use and secure platform.

Purchase USD Coin on Coinbase

What is a stablecoin?

Put simply, stablecoins are digital money. Their prices are tied to a reserve asset such as the US dollar or gold. This reduces volatility compared to other cryptocurrencies such as bitcoin. Because they are far less volatile, they are better suited to day-to-day commerce and transfers.

What is USDC?

USD Coin (USDC) is a type of stablecoin. 1 USDC is always worth the same as US$1, because it’s pegged to the US dollar. USDC is backed by dollar reserves that are at least equal to the USDC in circulation. These reserves are held in transparent, segregated accounts in regulated financial US institutions.

The currency operates on the Ethereum blockchain. This is the leading smart contract platform and is well supported by developers. It also allows for speedy transfers – they can be completed in under an hour – and also means there are none of the costs associated with traditional banking and transfer methods.

Back in 2018, Coinbase co-founded the Centre Consortium to develop USDC. The stablecoin has become one of the most popular options: its market capitalisation has grown by 150 times in three years. USDC also powers many innovative decentralised finance applications.

What are the pros of USDC?

The fact that USDC is always redeemable on a one-to-one basis with US$1, makes it far more stable than most cryptocurrencies. Cryptocurrencies, such as bitcoin, are usually associated with volatility, and their value can vary greatly depending on many external factors. 

However a stablecoin, such as USDC, offers a safer way to trade in and hold cryptocurrency. It’s an attractive option for those who want to hold cryptocurrency even when the market is in turmoil, as it has been as of late, but don’t want to expose themselves to heavy losses. 

You don’t need a bank to hold USDC – you can sign up to an exchange like Coinbase. USDC can easily be used in online transactions. Stablecoins also offer ways to earn interest on your holdings, usually at a higher rate than you would get from a bank.

Owners of USDC will also be able to interact with new decentralised applications – known as dApps – allowing access to trading, insurance, saving, lending and borrowing, all while using a trusted form of digital currency. Check out Coinbase Wallet for access to DeFi here.

Is USDC easily accessible?

You can convert US dollars to USDC by creating or signing in to your Coinbase account. As part of its mission to increase economic freedom in the world and in order to make USDC more available and accessible Coinbase is waiving commission fees when customers buy or sell USDC via any fiat currencies on the platform – from Australian dollars to South African Rands.* 

Additionally, users can earn 1% interest on their USDC holdings. Coinbase will distribute rewards for the days you have a balance of at least $1 of USDC on Coinbase every month, meaning the higher your USDC balance the more rewards you will earn.**

Coinbase’s research shows USDC has been more readily adopted in the US, but it is hoping to increase its use throughout the globe. Currently three times more USDC is bought with US dollars versus non-US dollar currencies. 

Coinbase believes this is likely because users outside the US have to pay fees to convert their local currency into USDC which creates a “barrier to broader international adoption”.

* No commission fees attributed to Coinbase will be charged until further notice. However, spread, and processing fees charged by third party processors, will continue to apply. This feature may not be available to all regions.

** See terms for USDC APY

Disclaimer

Cryptocurrency is unregulated in the UK. The value of investments can go down as well as up. Profits may be subject to Capital Gains Tax. See terms for USDC APY