USD Coin (USDC) is a multi-chain, fiat collateralized stablecoin, pegged at a 1:1 ratio with the US dollar. It's one of the most popular stablecoins, with a market cap of more than 42 billion, and billions are traded daily. Despite being pegged to the dollar, USDC is a crypto asset and therefore you might have a surprise tax bill in store. Don’t worry, Koinly can help you calculate taxes for USDC and thousands of other tokens, across multiple blockchains. Here’s how.
From a tax perspective, it doesn’t matter that UDSC effectively works like a dollar - it’s still a crypto asset and therefore a kind of property, which means a couple of taxes may apply. Check out our crypto tax guides for specific information about crypto tax where you live but, generally speaking, two taxes may apply to your USDC transactions:
As a top 10 cryptocurrency by market capitalization, it’s inevitable that the IRS is taking an interest in USD Coin. But how does the IRS track USDC and other cryptocurrencies?
Blockchains, other than private blockchains like Monero, are public ledgers. That means anyone, including the IRS and other tax offices, can search and find transactions relating to a specific public address.
All the IRS then needs to do is link your identity to a particular wallet.
There are a couple of ways the IRS can do this. One of the most common, and aggressive, is to issue John Doe summons to centralized crypto exchanges to compel them to share customer data, potentially including your verification details like your name and address, as well as details on any wallets you’ve transferred to using a centralized crypto exchange.
As well as this, many centralized crypto exchanges issue what’s known as a 1099 form - a form that reports income from sources other than your employer. You may receive a 1099 form if you’re earning over a certain amount in crypto, or if you’ve traded a certain volume of crypto. Whenever you get a 1099 form, the IRS gets an identical copy.
You can learn more about how the IRS tracks USDC and other crypto, here.
The precise steps to calculate and report your USDC taxes depend on where you live and your tax office. But generally speaking, you’ll need to report any gains, losses, or income from USDC investments as part of your annual tax return.
This starts by calculating your USDC gains and losses - even if they’re minuscule - as well as the fair market value of any income from USDC in your fiat currency on the day you received it.
It can be very time-consuming, which is why most investors opt to use a crypto and USDC tax calculator like Koinly. Koinly can calculate your gains, losses, and income for hundreds of thousands of coins and tokens - including USD Coin.
All you need to do is connect your blockchain to Koinly and it’ll do the rest. Here’s how.
To import your USD Coin transactions into Koinly, you’ll need to connect each blockchain you use to interact with USDC to Koinly.
This is really easy to do, you just need your public address from each blockchain - but remember, you’ll need to do this for each wallet you use to interact with USD Coin in order for Koinly to correctly identify your cost basis, transfers, sales, swaps, and more.
You can find steps on how to connect a variety of popular wallets to Koinly on our integration pages, but here’s an example of how it generally works.
1. Remember, you’ll need to do this for every wallet you use to interact with USDC (and any other tokens!) in order to calculate your crypto taxes correctly. As USDC is multi-chain, you’ll need to add your public address to Koinly from each blockchain (and wallet!) in order to import your complete USD Coin transaction history.
2. It’s really helpful to name your wallets when you’re adding them to Koinly. If you need to troubleshoot later on, it can help you identify and fix issues much faster!
3. You may also be able to upload your transaction history to Koinly as a CSV file instead of connecting using your public address if you prefer, but this depends on the wallet you’re using. You can search for your wallet on our integration pages to find out more about how to get a CSV file from your wallet.
We’ve got plenty of help at hand if you’re having any trouble connecting USDC to Koinly:
Sign up free today to calculate your USDC taxes
USD Coin (USDC) is a multi-chain, fiat-collateralized stablecoin that is pegged to the US dollar at a 1:1 ratio and backed by fiat reserves. It is a top 10 cryptocurrency with a market capitalization of more than $40 billion.
You can buy USDC on centralized crypto exchanges including Coinbase, Binance, and Kraken, as well as swap other tokens for USDC on a variety of decentralized crypto exchanges.
USDC is a fiat-collateralized stablecoin. This means it's 100% backed by cash, so for every $1 of USDC in circulation, Circle holds $1 in reserve with regulated financial institutions.
Stablecoins are a popular investment as their price volatility is reduced. However, USDC has briefly depegged before in very turbulent market conditions. Investors always should do their own research before investing and know the risks.
Yes, you can use USDC as a means of payment either by using payment processors that accept USDC or by using a crypto debit card. But remember - spending USDC may result in a taxable transaction.
Yes. USDC is a multi-chain stablecoin, pegged to the US dollar at a 1:1 ratio and collateralized by fiat reserves.
Yes, during very turbulent market conditions in May 2022 - following the collapse of Terra Luna’s stablecoin UST - USDC and many other stablecoins momentarily depegged and restabilized shortly after. More recently, USDC depegged during a bank run after it was revealed that around $3.3 billion of reserves were held with Silicon Valley Bank, which collapsed before intervention from central banks.
The total supply and circulating supply of USDC at the time of writing is more than 40 billion.
Yes. USDC is a fully reserved stablecoin, meaning for every 1 USDC, there is $1 backed by cash or short-dated US treasuries.
USDC is a multi-chain token, available on several blockchains including Ethereum, Solana, and Avalanche.
USD Coin is a popular investment. It’s a top 10 cryptocurrency, making it one of the most widely adopted stablecoins. However, as with all cryptocurrencies, you should do your research before investing to ensure you understand the risks involved.
You can stake USDC through centralized crypto exchanges like Coinbase Earn or stake your USDC through decentralized protocols.
USDC is similar to USDT and BUSD in that its a collateralized stablecoin. Some investors prefer USDC and BUSD as they’re both fiat collateralized and haven’t faced the same controversies USDT has. For BUSD specifically, some investors may prefer this stablecoin as its more widely adopted.
Yes. You may have to pay taxes on your USD Coin investments. Although USDC is pegged to the value of a dollar, it’s still a crypto asset and therefore may be subject to Capital Gains Tax or Income Tax depending on your specific investments.
This depends on where you live. For example, in the US, taxpayers need to report every single time they sold, swapped, or spent USDC throughout the financial year - and any gain or loss no matter how minute - in Form 8949 and Schedule D, as well as any crypto income in Form 1040 or Schedule C.
Yes, stablecoins are taxable in the same way that other cryptocurrencies are. Any gains from selling, swapping, or spending stablecoins are generally subject to Capital Gains Tax.
Stablecoins do not offer any specific tax advantages compared to other cryptocurrencies. However, using stablecoins can help minimize any potential taxable gain from spending crypto as your cost basis will theoretically remain the same from the point you purchase to the point you spend it.