Circle enables seamless USDC-USD transfers, providing a bridge from banks to DeFi

The result of developments in both crypto technology and regulation, Circle’s new USDC API provides a bridge between crypto and traditional finance.

Circle, the company behind the second most popular stablecoin USD Coin, has rolled out a new API that will allow for the seamless transfer of USDC to USD via automated clearinghouse (ACH) systems. 

The first exchange to adopt the new API will be derivatives and futures specialist FTX, looking to speed up USD settlement processes on behalf of their customers.

In a blog entry, project manager Gee Chuang described how Circle’s ACH API improves connections between the fiat world and the digital world by introducing interoperability among payment rails, such as card, wire and blockchain transfers. Using the API, USD funds can be transferred easily between banks and blockchains with processing traditionally done manually, now automatic.

Circle has partnered with Plaid, a company that specializes in online account security and verification, to provide a process for streamlining USD/USDC transfer through Circle. Chaung said:

“This process prevents common errors like mistyping bank accounts or routing numbers and ensures greater user security, while reducing fraud reversal risks. No digging around for numbers, no clunky codes, no switching between applications during the process.”

More than 50 countries use some version of ACH payment processing, including the EU, United States, United Kingdom, China, Japan and South Korea. Circle has also partnered with Visa to process crypto-related payouts across 30 countries covered by their network.

USD Coin is primarily an Ethereum-based token that can be exchanged for US dollars on a 1:1 basis and is backed by a reserve of regularly-audited assets. Launched in Oct. 2018 as an alternative to Tether, there are currently about 5.4 billion USDC in circulation, making it the second biggest stablecoin by market cap, after USDT.

Demand for USDC has been at an all-time high, setting weekly volume records during the first three weeks of the new year. In addition to being used heavily at Binance and Coinbase, USDC is also a stablecoin favorite among DeFi traders, with platforms like Uniswap, Curve and Compound accounting for hundreds of millions in daily trading volume.

Circle CEO Jeremy Allaire has long been a proponent of integration between the digital currency space and traditional finance, appealing to the U.S. Treasury Department in Dec. 2020 to allow crypto industry collaboration in the regulation development process.

Speaking at a fintech festival earlier that month, Allaire predicted that upcoming breakthroughs in blockchain technology will encourage massive adoption, putting its potential benefits “in the hands of hundreds of millions, if not billions of users.”

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$18K Bitcoin price, eh? BTC market cap may pass Canada’s monetary base

Bitcoin’s market cap is rapidly surpassing the monetary base of multiple national currencies and it looks like the Canadian dollar is next.

As Bitcoin (BTC) blasted through the $14,000 level its market capitalization surpassed the monetary base of the Russian ruble. This measure includes both physical currency and bank reserves, both of which are usually held by a country’s central banks.

Bitcoin market price inferred to match top global monetary bases. Source: Crypto Voices

The above chart may seem complicated at first glance, but it simply compares gold, silver, Bitcoin, and the remaining global monetary bases. We can see that the U.S. has $4.9 trillion physical notes, coins, and bank deposits parked at the Federal Reserve. By dividing this number by the current 18.5 million outstanding BTC, we reach the $263K stated above.

In order for Bitcoin’s market capitalization to match the U.S. base money figure, the price would need to surpass $263,000. Although this might seem far-fetched, BTC has already eclipsed multiple sovereign currencies like the Brazilian real, the Swedish krona, and the South Korean won.

This move is no small feat for a cryptocurrency that is only 11 years old. According to Fernando Ulrich, the economist behind Crypto Voices, the top 30 base money competitors cover 95% of GDP. Aside from the Euro covering many countries, some of the top 113 peg their currencies to the U.S. dollar.

Researchers at Crypto Voices concluded that:

“So far, the money monopoly ‘works’ for Central Banks, and for their governments. It’s virtually costless: fiat has proven to be nearly ‘unconstrained’ by the market value of gold.”

The researchers elaborated by saying:

“As for #bitcoin, if and when it becomes large enough to be on that chart, and / or held by central banks, then and only then will we have any idea as to what bitcoin ‘costs’ central banks.”

Some might interpret the analysis as bearish, but it’s actually the opposite.

The researchers at Crypto Voices infer that, so far, central banks and governments have maintained their ability to print money regardless of their gold holdings. Therefore, there is no pressure to seek a new “gold standard” or anything remotely similar.

As the researchers perfectly summarize, inflation depreciates fiat currencies little by little. This caused Bitcoin to surpass a number of currencies as they succumbed to excessive printing. In fact, 2020 had the most extensive global base money expansion ever registered.

Fiat base money supply. Source: Crypto Voices

As clearly shown above, the global money supply increased by $5.5 trillion in 2020. That’s a 28% expansion, while Bitcoin has kept its halving calendar, cutting its issuing by 50%.

Looking forward

The big question on the minds of investors is will Bitcoin’s stock-to-flow model prevail? According to some critics, there are several flaws in the assumption that BTC will reach $100K and higher in 2021 and beyond.

The ruble has fallen, as have many other sovereign currencies so now all eyes are on the Canadian dollar. As shown in the fiat base money supply chart, the Canadian dollar’s base money stands at $335 billion which is equivalent to an $18,000 Bitcoin price.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Fiat inflation has cost Bitcoin hodlers 20% over the past decade

Since 2010, inflation has turned $1 into 84 cents while $1 invested in Bitcoin would be worth $274,000.

Bad news — the increase in the Bitcoin (BTC) price over the past decade may have been overstated because of the accompanying fiat inflation. Since Bitcoin is typically denominated in fiat — United States dollars usually — it is not immune to its depreciation.

Bitcoin price versus Bitcoin price adjusted for inflation. Source: Cointelegraph.

In the decade that followed the economic crisis, the U.S. enjoyed some of the lowest inflation in history, which hovered around 2% annually. However, over the decade, this added up to almost 20%. Thus, if we use the 2010 dollar as our base and apply its subsequent depreciation to the price of Bitcoin, then the current price of $10,466 turns into $8,770. Though this may be a sobering realization for some long-time hodlers, it does not mean that Bitcoin was a bad investment or that it is not a good store of value.

$1 investment in 2010 in USD versus Bitcoin. Source: Cointelegraph.

On the contrary, if we compare the performance of Bitcoin and USD in the last decade (again adjusted for inflation), then there is no comparison. One dollar invested in USD would have turned into 84 cents, while one dollar invested in Bitcoin would be worth $274,000. Cryptocurrency has clearly done a much better job of value preservation.

Bitcoin inflation. Source: Digital Assets Data.

Bitcoin is not immune to inflation either, but that might over complicate the story somewhat. As long as the fiat inflation rate stays low and Bitcoin continues to appreciate at a rapid pace that it has done until recently, the effect of fiat inflation may be negligible for most investors. The only way to escape it completely would be to stop denominating Bitcoin in fiat. Then, perhaps, 10 years from now, we would be discussing how many Satoshis one might hope to buy with a dollar.

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