No, in many countries you cannot buy USD directly. You also cannot store USD in a local bank account. And in various places it's explicitly forbidden to hold USD as savings because it would devalue local currency if everyone started transacting in USD instead.
So, the "C" makes USD exposure available to anyone worldwide, assuming you have e.g. an Ethereum wallet.
I have family in third-world countries, and usually have them buy me flight tickets when I want to visit them. Cheapest way and easiest for them to withdraw, is me sending them USDC. Some of them use USDC directly to exchange with friends for goods and services, others manage to sell them P2P in their country for USD, which they can then trade for local currency.
Messy, inefficient and UX could be way better, but it works and is cheapest for everyone involved.
I have lived and travelled extensively in second and third world countries, and almost never had a problem buying or selling USD. Well, in some places there were indeed capital controls (Argentina, China), but that's rare, and I doubt use of USDC is legal then for the circumvention of regulation (which is basically the only use case of crypto).
If only you know the long queue you have to join now if you want to buy dollars from a Nigerian bank. Not just that you have to fill a form saying what the money is for which had better be one of the things in their list, you have to wait for months to get credited.
Many people visiting countries saying "I have been able to use USD wherever I go, I could even pay for dinners" miss the fact that it's often different for the people who live there, who are gonna have to integrate with the local legal/financial process in order to get their local currency. The tourist hardly have to care about it, and then they tell the internet that there is no problems.
The big one is that many countries do offer foreign currency accounts, but don’t properly hold reserves for them, so the security is there until it isn’t.
These appear to be cases where government regulation was imposed to limit access to foreign currency. Not, as you seemed to be insinuating ("but don’t properly hold reserves for them"), any problem with banks carrying insufficient reserves.
So, there was neither a technological problem moving fiat in our out of the country that would be amenable to a technological fix, nor unintended weaknesses in the regulatory regime covering local banks. Rather, it was deliberate government policy.
> These appear to be cases where government regulation was imposed to limit access to foreign currency.
It’s not « access to foreign currency », it’s « access to your own deposits ».
Cuz the banks and/or the central banks spent/seized the foreign currency before you, the depositor, could spend them. So much for trying to protect your assets by holding them in foreign currency.
So you are saying that there are countries where USDC is legal while opening a foreign brokerage account like IBKR and converting your currency to USD is illegal? And this is not just a perceived loophole? Could you give an example of a country like this so I could google?
Important question is that what would happen if someone started asking pointed questions? About why do you transact in this and doesn't it go against laws. Would the stance actually hold...
Yeah, how is this different than black market trading (which happened a lot in ex-communist countries including mine, but the currency traded was usually German mark).
Except it does a lot more than that as highlighted here. It's not just a USD + exposure. It's pretend to be USD + its own set of risks. I'd rather buy USD or if you can't then do something else.
It is also kind of an abstraction over cash and treasury bonds. A more liquid fractionalised cash/bond unit.
Though that seems to have been the problem here.
The original idea with a 100% collaterilised peg was that the entire reserve would be cash. Somewhere along the way treasury bonds were considered cash equivalent. Which on the face of it seems sort of reasonable but clearly they do have a different risk and liquidity profile. This allows the centre consortium to earn a yield.
So I'm not sure I think a USDC is a dollar, but also I'm not sure it's particularly different to what banks do with deposits to earn a yield.
One difference is you can reinvest the same USDC to earn a yield while the underlying backing USD also earns centre a yield.
Having the entire reserve as cash wouldn't exactly help here - imagine if 30% of USDC's total reserves was in Silicon Valley Bank, rather than just 30% of their cash. (I think I've pointed out before in discussions of Tether etc that stablecoins can't safely just hold their rexerves as cash in a bank account because banks can and do fail and FDIC protection basically does nothing at this scale, but I wasn't expecting it to be demonstrated quite so spectacularly.)
> The original idea with a 100% collaterilised peg was that the entire reserve would be cash.
What is cash? Banknotes? You can't store 500 million pieces of $100 banknotes easily or safely.
Cash usually refers to deposits at accredited financial institutions like banks. Effectively this is an amount of money that the bank owes to Circle. The bank deposits money elsewhere, and the central place where all the money is distributed is the Federal Reserve Bank, the central bank of USA, that can never go bankrupt. OTOH, treasury bond is money that US Treasury owes to Circle, so they are not fundamentally different than cash, and in some cases it's even safer since US Treasury bonds are usually regarded risk-free.
Stablecoins are a cryptocurrency that conforms to the ERC-20 standard[1] so they can be used in blockchain applications that want something that implements that. USDC/USDT are therefore the closest things to USD that can be used in that way.
Obviously people differ as to the utility of those applications but that's what the "C" gets you. You can do those things if you want to. Of course there's quite a lot you can do with actual dollars that you can't do with USDC so you give up a lot also.
A more legitimate use case. An Ethereum contract that converts ETH to USDC. Say you are selling something (an item, security, service or whatever). You can accept payment in any token (in your smart contract) and the token will be converted to USDC.
USDC is an ERC20 token on the blockchain. This is required to work with smart contracts and dapps. You can swap USDC for any on-chain asset using uniswap or mix them up using a mixer like tornado cash. It also escapes any capital controls to hold USD which is a benefit for those who are outside US and live in poor or draconian countries.
So, the "C" makes USD exposure available to anyone worldwide, assuming you have e.g. an Ethereum wallet.