Luno have revealed via a Blog Post that USD Coin (USDC) is now available to buy, sell, and store on Luno through both Instant Buy and Sell on the Luno Exchange, although it is not currently available in Malaysia.
Upon answering the question of “why USDC”, their post responds that USDC has a market capitalisation of over $5 billion, and Luno believes that USDC holds a number of advantages over other stablecoins such as Tether, particularly when it comes to safety.
USDC is fully collateralised, meaning that its reserves are held on a 1:1 ratio with the US dollar. So, for every 1 USDC out there, the original issuer of the coin holds 1 US Dollar in collateral. This is supposedly true of other stablecoins, but USDC is unique in that it’s issued by financial institutions who say they operate using the highest standards of corporate governance and commit to providing full transparency. All USDC issuers must report their USD holdings, which are in turn published by accountancy firm Grant Thornton LLP on a monthly basis. These monthly reports are available online to anyone who wishes to view them. This means you can be confident that USDC is always 100% redeemable for dollars.
USDC is governed by Centre, a membership-based consortium that sets technical, policy and financial standards for stablecoins. Centre consists of Circle and Coinbase. These are two of the most established companies in the cryptocurrency space, with a long track record of reliability, success, and following strict regulations.
Luno’s Blog Post explains that is a cryptocurrency pegged to a single underlying asset, or a basket of assets. In the case of USDC, it’s pegged to a single asset: the US dollar. Essentially, what USDC is doing is creating a ‘digital dollar’ by tokenising it and putting it on the blockchain.
The Blog Post further explains that Stablecoins are a bridge between the old financial system and the new. A digital version of the US dollar has a number of benefits over its paper counterpart. For one, it’s easier to transfer and can be moved anywhere in the world almost instantly. The ‘fiat version’ of the US dollar moves slowly because it has to contend with traditional financial institutions, their legacy processes, jurisdional regulations, and so on. USDC bypasses these barriers. Tokenising the US dollar also provides additional functionality, making it easier to program with and to use in dApps.
People use USDC for a wide variety of reasons. One of the primary reasons is to hedge against volatility during bigger market movements – either in cryptocurrency or your own local currency. In countries where the local currency is more prone to volatility, holding USDC allows you to store your wealth in a currency that is historically more dependable as it’s still the world’s reserve currency.
Another use case is for when users are selling crypto. When you sell, you may want to keep your funds on the platform. If you keep it on there as USDC, you don’t have to pay the fees to withdraw and deposit.
Global Crypto will provide updates on this news from Luno as and when they become available from the Luno South Africa team.