U.S. lawmakers passed the Genius Act on July 17, and President Donald Trump signed it into law a day later. It was a historic moment, since this is the first piece of legislation regulating the cryptocurrency industry. Specifically, it regulates stablecoins, cryptocurrencies designed to maintain a value tied to a fiat currency.
USDC (USDC 0.00%) is the second-largest stablecoin by market cap, and in my opinion, it's the stablecoin most worth buying. Here's why.
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1. It's fully backed by publicly visible reserves
The most important feature in a stablecoin is that it maintains its peg to a fiat currency. If a stablecoin loses its peg, it can be disastrous. People liquidate their holdings as quickly as possible because they no longer trust in the stablecoin to remain stable, and the price plummets.
Circle Internet Group (CRCL 2.06%), the company that issues USDC, ensures that the coin maintains its peg with one-to-one reserves, meaning every USDC is backed by $1 in cash or cash equivalents.
To Circle's credit, it has always been transparent about its reserves. Since USDC's launch in 2018, the company has published monthly attestations to its reserves with third-party assurance from a Big Four accounting firm.
The company also had its initial public offering on June 5, opening itself up to the stringent financial reporting requirements that come with being publicly traded.
The same isn't true for USDC's biggest competition, Tether. Its issuer, Tether Limited, doesn't have third-party assurance of its reserves and even received a $41 million fine in 2021 for misrepresenting its reserves. Given the choice, I'd much rather buy a stablecoin that has had legitimate, transparent reserves from the beginning.
2. You can use it for crypto trading
Crypto is a fast-moving market. If a coin that you like drops in value, you might want to take advantage and buy the dip. Keeping USDC in your account (or crypto wallet) ensures you can do that at a moment's notice.
Or, if you want to take out some of the gains you've made on a successful crypto investment, you could convert it to USDC. Just make sure you're ready to pay the cryptocurrency taxes on it, as converting one coin to another is a taxable event.
USDC gives you a way to easily enter and exit positions without needing to convert crypto to a fiat currency. And as the second-largest stablecoin, it's widely available on exchanges.
3. You can earn rewards on your USDC
When they work as intended, stablecoins don't grow in value, so they're not an investment. But you can earn rewards with them and generate passive income.
Several crypto exchanges pay rewards on USDC, and the rates are fairly high. For example, Coinbase currently pays a base rate of 4.1%, while Kraken pays 5.5%.
If you want to seek out even higher yields, you could deposit your USDC on a crypto lending platform, although this carries more risk. But even without doing anything extra, rewards programs allow you to earn a reasonable return on the USDC you have sitting in your account.
4. It's a convenient way to transfer money
One of the best real-world uses of blockchain technology is transferring money quickly and cheaply. It's especially useful for sending and receiving money internationally, which can take days and cost $15 to $30 with traditional bank transfers.
USDC transactions process in seconds or minutes, and fees are a fraction of $0.01. But USDC is far from the only cryptocurrency that can boast about fast transactions and low fees. There are quite a few others, including XRP, a cryptocurrency specifically designed for cross-border payments.
But a stablecoin like USDC is a better choice when you don't want to run the risk of price fluctuations. The value is the same when you send it and when the other person receives it.
The passage of the Genius Act is exciting news for stablecoins and the crypto industry as a whole. USDC is arguably the stablecoin most ready for new regulations because of its transparent approach with its reserves. If you want to have some digital dollars on hand, USDC is the one I consider the safest choice.
