USD Coin in Brief
USD Coin is a dollar-pegged stablecoin launched in 2018 by Coinbase and Circle Financial. Unlike Tether, USD Coin operates in the fully-regulated US market and publishes full audits of its dollar reserves. If the market’s volatility has you looking for a stable place for your crypto holdings, CoinIQ’s guide to how to buy USD Coin will point you in the right direction.
- Backed by respected industry leaders.
- Operates within FinCEN regulations.
- Audited by a top-5 accounting firm.
- Listed on major exchanges.
- Provides benefits of stablecoin.
- Only listed on 6 of the top-20 exchanges.
- Skepticism of stablecoins by crypto purists.
What Is USDC?
USD Coin (USDC) is a stablecoin pegged to the price of the US dollar. Coinbase and Circle Financial, crypto exchange Poloniex’s parent company, announced USDC’s launch in September 2018. At the time, USDC was available at only a handful of crypto exchanges, digital wallets and other crypto services. How to buy USDC Coin is even easier now with dozens of exchanges and other services supporting the stablecoin.
How stablecoins work
Stablecoins have gotten a lot of bad press over the past several years due to the ongoing controversy over Tether and its possible role in 2017’s crypto boom. A true stablecoin, however, serves a useful purpose in crypto markets.
Crypto exchanges rely on stablecoins to make their businesses run smoother. When you deposit dollars in an exchange, they seem to show up in your account. What really happens behind the scenes, however, is the exchange uses the dollars to buy a stablecoin. This reduces its exposure to risk and limits the amount of money it must keep with a bank. Mati Greenspan, a market analyst with derivatives exchange eToro, explained the situation in a Business Insider interview:
“What exchanges like Bitfinex do is, rather than having a client’s balance held in dollars, they hold them in [tether]. So if somebody’s got their money on an exchange such as Bitfinex and they don’t have any current open positions, they’re actually probably in Tether.”
Investors make use of stablecoins as well. Let’s say you have a trading strategy that calls for selling off your ether, waiting a bit, and then buying into ripple. You could sell your ether for bitcoin, but that exposes you to bitcoin’s volatility. Instead, you buy a stablecoin to lock in the value of your holdings. It has the same value as dollars, but it’s still as easy to move around like any other crypto, you don’t have to deposit them in a bank account, and your tax exposure may be different. Once you’re ready to get back into the market, you use the stablecoin to buy ripple.
How USDC works
USDC is a fully collateralized stablecoin built as an Ethereum ERC-20 token. For every USDC in circulation, there is a US dollar locked away in an escrow account. This keeps the value of the USDC steady at $1, since there is no volatility risk. Although USDC’s founders don’t say it explicitly, they clearly created the stablecoin in response to Tether’s opaque dealings:
“Existing approaches have lacked financial and operational transparency, have operated in unregulated offshore jurisdictions with unknown banking and audit partners, and have been built as closed-loop ecosystems and closed source technologies.”
The non-profit consortium Coinbase and Circle Financial created to run USDC, called Centre, is based in the United States and subject to US regulations. Financial institutions that issue USDC must comply anti-money-laundering (AML) regulations, provide detailed audits of their holdings and meet other requirements. In addition, top-five accounting firm Grant Thornton LLP performs monthly audits of all USDC reserves, which are posted to the Centre website.
When a client goes to a USDC issuer to buy the stablecoin, the issuer submits verification to Centre that it has the dollars in escrow. Centre then mints fresh USDC and transfers them to the issuer, who gives them to its client. When the client cashes out, the USDC goes back to Centre, where it is destroyed. A confirmation to the issuer authorizes it to release the dollars back to its client.
Reaction to USDC
Given the ongoing suspicion of Tether’s governance, many in the crypto community welcomed the introduction of a more transparent stablecoin. Dozens of exchanges and other companies soon announced support for the USDC.
Three weeks after the announcement, Circle released a few performance metrics. The growing number of exchanges listing USDC boosted growth in trading volumes by 2000% and market capitalization by 85%
How Do You Buy USDC?
Buying USDC from an official issuer is not how most people do it. Only institutional investors, crypto exchanges and other large companies go that route. For most people, though, that is not the way to buy USD Coin. You buy it just like any other token.
Token trading platforms
Since USDC is built on the Ethereum blockchain as an ERC-20 token, many of the decentralized trading platforms list the stablecoin. These platforms offer secure trading, but many are limited to tokens only and cannot offer the wide range of cryptocurrencies that centralized exchanges offer.
Airswap is a distributed app (dApp) built on the Ethereum blockchain the provides peer-to-peer trading of ERC-20 tokens. The service does not charge any fees beyond the gas required to make Ethereum-based transactions. Market makers do, however, have to post a stake in order to be visible to other traders. Airswap listed USDC in late November 2018.
DDEX is another decentralized token trading platform. The service has many of the features of advanced trading platforms as well as relatively low fees. Market takers pay a 0.2% fee while market makers receive a 0.2% payment as well as additional rebates.
DDEX listed USDC in early November 2018.
EtheEx is a decentralized trading platform built on the Ethereum blockchain. As with similar systems, it specializes in ERC-20 tokens. The trading platform has a maker-taker fee structure that starts at 0.25%. EthEx added USDC support in early December 2018.
Bitfinex spun off its token trading platform EthFinex into an independent service. The decentralized trading platform supports trading of ERC-20 tokens as well as leveraged trading. EthFinex added USDC support in early December 2018.
American token trading platform Everbloom charges market takers 0.3% for their trades. Everbloom added USDC support in October 2018
IDEX is a high-speed token trading platform created by Panama-registered crypto company Aurora and its Aurora DAO. The “semi-decentralized” exchange promises to combine the speed and liquidity of a centralized exchange with the security of decentralized settlement. According to DappRadar, IDEX is the most popular decentralized exchange and competes with gambling services as the most popular dApp on any platform.
Both the USDC and TUSD stablecoins joined IDEX’s 400-token listing in early October 2018. Trading fees are 0.1% (maker) or 0.2% (taker) and the taker pays any gas fees.
Paradex, a subsidiary of Coinbase, is a decentralized platform for Ethereum token trading. The platform lists more than 20 tokens, including USDC. Few traders seem to use Paradex, however, as only four of the platform’s trading pairs have any volume.
Switcheo Network is a decentralized exchange that supports tokens built on either the Ethereum or the EOS blockchains. As with most decentralized exchanges, Switcheo is not huge — only 25,300 people use it worldwide.
You’ll find about 50 tokens listed on Switcheo Network. USDC support arrived in early December 2018. Market takers pay a 0.2% fee, discounted to 0.15% when they use Switcheo’s utility token. Market makers trade for free.
Singapore-based Thor Network created Thor Swap in October 2018 as a decentralized service for small-scale trading of Ethereum tokens. The company hopes to win over users with fast speed and tight security. Thor Swap maintains a pool of tokens so people don’t need to wait for a matching trade.
Thor Swap has a 40-token listing, which expanded when it added USDC in mid-November 2018. A 0.5% service fee applies to all trades.
Simple crypto exchanges
Full-service crypto exchanges aren’t always the easiest trading platforms to use. If you’re new to crypto or just want to make a small trade quickly, you can use these simpler platforms to buy USD Coin. You will have to pay a higher fee, but that’s the price of convenience.
European crypto trading service Changelly was founded in Czechia, but is now based in Malta. Unlike centralized exchanges, Changelly does not hold your fiat and crypto. What happens when you place a trade is that Changelly checks the big exchanges to find the best rates. It then places the trade on your behalf and sends you your coins. As a result, the risk of a hack is almost non-existent.
You can use US dollars or euros to purchase crypto with a bank card or even make credit card purchases of bitcoin. Changelly has a listing of 95 cryptocurrencies and tokens. Circle announced in mid-November 2018 that Changelly would add USDC to its listing. By early December, however, the stablecoin was not available.
Of course, there’s a catch. Convenience and security don’t come cheap. Changelly charges a 0.5% fee on all crypto-to-crypto swaps. Fiat transactions can generate more fees from various service providers and banks.
Founded in 2017, Swft offers a service similar to Changelly’s. You can quickly swap between its listed cryptocurrencies, including USDC. Fees are calculated in terms of Swft’s own utility token, SwftCoin. Lacking any support options, however, Swit will leave you hoping your trades go through without a hitch.
Full-service advanced exchanges offer large listings, sophisticated trading options, and liquid markets. You can also find much lower trading fees on these exchanges, especially if you trade a lot of crypto frequently. As exchanges start reducing their exposure to Tether, these places are easy ways to buy USD Coin.
Founded in China, shifting regulatory standards forced Binance to migrate to Malta. Still one of the largest crypto exchanges, Binance boasts low 0.1% trading fees that fall farther as you trade more.
Binance lists more than 140 cryptocurrencies, but does not deal in fiat. Binance announced the listing of USDC in mid-November 2018 as well as plans to publish monthly audits of its USDC/USD balances.
Hong Kong-based Bit-Z was founded in 2016 to serve Asia’s crypto traders. The company weathered China’s crypto crackdown as well as the rise and fall of the crypto markets.
Bit-Z lists 50-60 cryptocurrencies and listed USDC in early November 2018.
Bitfinex was founded in 2012 and, for a while, was one of the largest crypto exchanges. The company’s leadership, however, also leads Tether. Their refusal to provide clear, unequivocal proof that USDT is fully backed by US dollars has led to controversy and suspicion in some circles. The exchange’s maker-taker fee structure tops out at 0.2% and quickly drops as you trade more frequently.
You’ll find more than 230 trading pairs on Bitfinex’s markets. Bitfinex added USDC support in early December 2018.
Based in the Cayman Islands, BitMart has only been around since 2017 but still boasts more than half a million customers. As a FinCEN-registered money services business, BitMart is allowed to operate in the United States.
BitMart listed USDC in early November 2018, but the only coin it’s paired with is Tether.
BitMax launched in early 2018 claiming to be a “third generation cryptocurrency exchange”. Founded by financial industry veterans, the exchange offers low 0.04% trading fees and access to advanced features like trans-fee-mining and reverse mining.
BitMax has a 16-coin listing including USDC which it added in early December 2018.
Coinbase renamed its advanced trading platform GDAX to Coinbase Pro in 2018 as part of a new strategy. The company wants to extend even further past its origins as a quick-and-easy place to buy bitcoins. Serving advanced traders and institutions will drive much of its growth.
As one of USDC’s founders, Coinbase listed the new stablecoin on its Coinbase Pro market in October 2018.
Founded right before the peak of the crypto bubble, the British exchange CoinEx applies a 0.1% fee on all trades. CoinEx has a 64-coin listing including USDC.
Based in Singapore, CoinHub focuses on the needs of crypto traders in the Middle East. The maker-taker fee schedule starts at 0.25%, but does not decline with volume.
CoinHub lists about a dozen coins, tokens and fiat currencies. USDC support arrived in early December 2018.
South Korean blockchain firm CoinPlug launched in 2013 as an exchange, digital wallet, bitcoin ATM operator and crypto payment processor. The company invests significant sums in research and development, letting it claim to be the world’s largest holder of blockchain patents.
The company’s recently-launched trading platform CPDAX places a priority on transparency and security. CPDAX added USDC to its listing in mid-November 2018.
Singapore-based crypto exchange DigiFinex launched at the end of 2017 by a former Baidu executive and experts in the financial and crypto industries.
You’ll find more than 40 coins and tokens on the exchange. However, the only coin paired with USDC is Tether which DigiFinex is phasing out. All trades cost 0.2%.
Hong Kong-based Gatecoin was founded in 2013 by veterans of the island’s financial industry. The company provides a bitcoin and ERC-20 token trading service. Technical issues forced the company to suspend USD transfers for several months in mid-2018. For an Asian exchange, Gatecoin has relatively high fees of 0.35% (taker) and 0.25% (maker).
Gatecoin has nearly 100 trading pairs, including USDC which arrived in early November 2018.
Launched in the spring of 2018, South Korean trading platform Hanbitco makes security the cornerstone of its offering. The company received ISO/IEC 27001 certification which documents its compliance with information security best practices.
Hanbitco added USDC support to its 16-coin listing in October 2018. Both market makers and market takers pay a 0.01% fee with significant discounts for more frequent traders.
Taiwanese exchange Hotbit is rather opaque about its leadership and background. The exchange does have a listing of more than 150 coins and tokens. USDC joined Hotbit in early November 2018. Both makers and takers pay a 0.25% trading fee on certain orders.
Korbit is a South Korean crypto exchange that became the first to accept fiat deposits in the Korean Won when it opened in 2013. As with other Korean exchanges, Korbit came under pressure from regulators for lax security and the integrity of the coins it lists. In May 2018, possible to appease regulators, Korbit delisted privacy coins such as Monero and Dash.
Korbit now has a 16-coin listing includingUSDC which joined in mid-November 2018.
Singapore-based KuCoin launched in August 2017. Since then, it attracted more than 5 million users who generated $320 million in trading volumes.
You’ll find nearly 200 coins and tokens listed on KuCoin, including USDC. All trades incur a 0.1% trading fee, but discounts are available for holders of KuCoin’s utility token.
Japanese trading platform Liquid launched in September 2018, making it one of the newest crypto exchanges in the industry. Liquid’s parent company, however, is Quoine which has run crypto exchanges since 2014. In addition to spot trading, Liquid allows margin trading.
Liquid lists more than 90 coins and tokens. The Japanese company added USDC in mid-November 2018. Market takers pay a 0.15% fee on their trades while market makers receive a 0.075% credit.
Originally based in Hong Kong, OKEx has since migrated to Malta. The company offers fiat-crypto and crypto-crypto trading as well as a crypto futures market. Now one of the largest exchanges in the world, the Malta Blockchain Awards named it the Crypto Exchange of the Year.
OKEx added USDC to its listing in mid-October 2018. Maker/taker fees start at 0.1% and 0.15% respectively.
Since Circle Financial owns Poloniex, it shouldn’t be surprising that the crypto exchange listed USDC on the day of its announcement. In November, the exchange sweetened the pot by eliminating fees on USDC trades.
Poloniex lists more than 50 coins and tokens with maker/taker fees starting at 0.1% and 0.2% respectively. Throughout 2018, Poloniex waived all trading fees on the BTC/USDC market.
What’s the Best Way to Buy USDC?
Stablecoins like USDC are popular during up markets and down markets as a way to shelter your crypto investments from volatility. With so many exchanges offering USDC, you’re bound to find one that meets your specific trading needs.
For beginner traders
If you’re just getting into the crypto business, Changelly is an easy way to buy USDC. It does charge 2-3 times more than what you would pay on the advanced exchanges. But making the trade is so much easier.
For advanced traders
Most of the advanced exchanges offering USDC will serve traders well. Since Poloniex owner Circle Financial and crypto giant Coinbase created the stablecoin, either of those exchanges would be a safe bet.