Circle USD

  • Cryptoasset Report
  • February 5, 2019

Circle USD is a fiat-collateralized ERC-20 stablecoin with monthly reserve audits, implemented as a joint venture between Circle and Coinbase.

Overview

Developed partially in response to concerns about the structure and reserves of Tether, USDC is a USD-pegged stablecoin with regular reserve audits and notable exchange and wallet integrations. The parent company, Circle Internet Financial, is a regulated Money Transmitter that also owns the Poloniex exchange. Among the many use cases for stablecoins, Circle and Coinbase emphasize facilitating inter-exchange liquidity and price discovery, as well as allowing unbanked and under-banked consumers to easily access USD through the Coinbase Wallet.

Circle USD is administered through Centre, which is a joint venture between Coinbase and Circle. Circle USD is the first instance of the Centre network, which aims to provide future interoperability with other price-stable cryptoassets. The Centre network aims to be blockchain agnostic and interoperable, but exists first on Ethereum. Centre is not a financial institution itself, and holds no customer funds—it is a set of smart contracts and standards upon which price-stable assets can be built and interoperate. Similarly, issuing network members (such as Circle) do not control the token contracts. Centre is initially a wholly owned subsidiary of Circle, with plans to transition to a separate Centre organization. The Centre network also plans to support scalability through Bitcoin & Ethereum state channels, and interoperability with hardware wallet providers and existing payment processors, such as Venmo and WeChat.

In the future, Circle may invest the deposited funds in `highly-liquid, AAA-rated fixed income securities`. Given the interest and utility of a reliable stablecoin with the blockchain community, this investable sum may generate significant cash flow for Circle if USDC is adopted broadly. Monthly audits of these holdings are conducted by independent CPA Grant Thornton. As a result of the joint venture, USDC became the first stablecoin listed on Coinbase in early October 2018, in tandem with USDC’s general launch. By the beginning of 2019, over $250 million in USDC had been minted.

Asset Details

To create new USDC, individuals or institutions deposit fiat through a wire transfer to one of Circle’s several banking partners including Silvergate Bank and US Bancorp Asset Management (USBAM), and receive tokens to a local wallet. Each depositor must complete a KYC/AML process before creating new USDC. There are no fees to redeem or create USDC through a valid USD wire transfer. Though USDC is an ERC-20 token and can be used on any compatible wallet, Centre does maintain a global blacklist of addresses where USDC cannot be sent or received. Users can be blacklisted for fraudulent or illegal activity, as determined by Circle or a legal order through a third party. Holdings on blacklisted addresses may be permanently unrecoverable. Though not unique among peer fiat-collateralized stablecoins, such as Gemini, this does represent an element of centralization distinct from more permissionless cryptoassets such as Bitcoin. In theory, ownership of USDC can be revoked by Circle.