> I’m hearing that you can’t even use USDC to exchange for bitcoin/ETH on Coinbase right now.

That would be the fault of Coinbase, not Circle or USDC. On other exchanges, like Bitstamp, you can freely buy/sell your USDC to crypto/fiat.

USDC is supposedly backed by USD. If Cirle/Centre doesn't have access to enough USD, they cannot maintain the peg of USDC.

What does that have to do with exchanging for crypto?

If I move USDC from one wallet to another, and someone else moves bitcoin from one wallet to another in exchange for that USDC, that transaction happens entirely on the blockchain and at no point involves a bank or a peg.

The only reason to disable that function is to force people to hold USDC.

For better or worse, Coinbase does not have USDC trading pairs. They have USD trading pairs, which if you have USDC you're typically expected to access by redeeming your USDC for USD and then using the USD trading pairs. But since USDC to USD redemption is halted for now, you effectively cannot trade USDC for any other crypto on Coinbase.

However, other exchanges actually do have USDC markets. If you deposit your USDC with them, then you can directly trade order books on USDC/USD, BTC/USDC, and ETH/USDC, which function regardless of the lack of redemption and regardless of the actual market price of USDC.

If Coinbase had USDC trading pairs like other exchanges do, it would avoid the issue you outlined in your comment, but it would also fragment liquidity across two markets that are effectively identical during business-as-usual periods where redemptions function properly.

That's not true, Coinbase has active USDC/USDT, USDC/EUR, and USDC/GBP pairs. I've traded on them overnight. They just disabled the 1-1 conversion with USD.

My bad. Looks like they added those pairs in 2021 and I didn't notice (though it looks like you have to "opt out of the USD and USDC unified experience" in order to access them). I edited my comment accordingly.