Going to Circle to redeem your USDC for FIAT USD is not the only way of receiving FIAT USD from USDC. You can also sell it for another asset, and sell that for FIAT. Or sell it for FIAT on an exchange.
The OP was about the safety of "holding" fiat on a single exchange vs USDC on your wallet.
Your point about non-custodial wallet risk is a misonemer as this is purely about can you trust yourself more than trust an exchange.
I don't think you understand how a currency peg works. If USDC loses the peg, arbitrageurs will buy USDC and redeem them, pocketing the difference. This will create a buying pressure that will re-establish the peg. Therefore maintaining the peg depends crucially on the issuer's ability to redeem USDC. If the issuer fails to redeem USDC, it's game over. The point that I made about the risks associated with using non-custodial wallets is also very valid.
I don't think you understand how USDC's redempetion works. It's not a website accessible by anyone open for redemptions 24/7. Read on that first before discussing this topic please.
