Glossary · U
USDC
A fiat-backed stablecoin issued by Circle, pegged 1:1 to the US dollar and backed by cash and short-term US Treasury bonds held in regulated US financial institutions. USDC is fully regulated, with monthly attestations of reserves. It is the most widely used stablecoin in DeFi as of 2026.
Last updated
How USDC works in practice
USDC is a fiat-backed stablecoin: the issuer holds cash and short-dated Treasuries and honours redemptions at par for verified institutional clients. Its peg rests on that reserve and on continued access to banking, not on any on-chain mechanism.
Worked example
In March 2023 USDC briefly traded near 0.87 after a portion of reserves was found to be held at a failed bank. It recovered when regulators guaranteed the deposits — a recovery that came from the traditional system, not from code.
Figures are illustrative and chosen to be checkable, not live market data.
The mistake that costs people money
Fiat-backed stablecoins carry banking and regulatory risk, and the issuer can freeze addresses. That freeze capability is a feature for compliance and a risk for anyone assuming on-chain assets are unseizable.
USDC: common questions
- What is USDC?
- A fiat-backed stablecoin issued by Circle, pegged 1:1 to the US dollar and backed by cash and short-term US Treasury bonds held in regulated US financial institutions. USDC is fully regulated, with monthly attestations of reserves. It is the most widely used stablecoin in DeFi as of 2026.
- How does USDC work in practice?
- USDC is a fiat-backed stablecoin: the issuer holds cash and short-dated Treasuries and honours redemptions at par for verified institutional clients. Its peg rests on that reserve and on continued access to banking, not on any on-chain mechanism.
- Can you give an example of USDC?
- In March 2023 USDC briefly traded near 0.87 after a portion of reserves was found to be held at a failed bank. It recovered when regulators guaranteed the deposits — a recovery that came from the traditional system, not from code.
- What do people get wrong about USDC?
- Fiat-backed stablecoins carry banking and regulatory risk, and the issuer can freeze addresses. That freeze capability is a feature for compliance and a risk for anyone assuming on-chain assets are unseizable.