USDC launched in 2018 as a joint venture between Circle and Coinbase, designed as an institutional-grade regulated stablecoin that could compete with Tether’s USDT. The pitch was simple: every USDC would be backed 1:1 by dollars and short-duration treasuries, audited regularly, and issued by a US-regulated entity. For regulators, corporates, and risk-averse users, USDC was the “safe” stablecoin.
USDC grew rapidly through 2020-2022 as DeFi boomed. It became the preferred stablecoin for Aave deposits, Compound lending, Uniswap LPs, and most serious DeFi activity on Ethereum. At its peak in 2022, USDC had more than $55 billion in supply. Circle was widely expected to IPO at a massive valuation, and USDC looked like the inevitable winner over USDT as the world’s primary onchain dollar.
Then Silicon Valley Bank failed in March 2023. USDC had $3.3 billion of its reserves at SVB, and Circle’s CEO Jeremy Allaire confirmed the exposure in a Friday night tweet. USDC depegged over the weekend, briefly trading at $0.87 before the FDIC announced SVB depositors would be made whole. The episode was traumatic for DeFi — protocols that treated USDC as a dollar equivalent suddenly had to price in bank risk. USDC supply dropped from $55B to $22B over the following year as users migrated to alternatives.
USDC has since recovered to around $45 billion and Circle actually went public in 2025 at a strong valuation. But the depeg event permanently changed how DeFi thinks about stablecoins. No asset is risk-free. “Institutional backing” turned out to mean “exposed to institutional failures.” The lesson wasn’t that USDC was bad — it remains one of the most transparent and well-run stablecoins available — but that all stablecoins carry some systemic risk, and users should understand exactly what they’re holding before treating it as a dollar.
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