USDT vs. USDC: The Battle for Stablecoin Supremacy
Cryptocurrencies have a reputation for being highly volatile, but not all blockchain tokens vary in value. There's a whole class of cryptos, called stablecoins, that prioritize keeping their price as regular as possible. Many of these popular stablecoins, such as USDT and USDC, maintain their price by pegging their value to the United States dollar. However, even if their prices seem similar at a glance, USD-pegged stablecoins aren't identical. If you're interested in learning more about stablecoins, explore this guide to find out the differences between USDT and USDC.
Key Takeaways:
USDT is the largest stablecoin in the cryptocurrency market. Also called Tether, it's been operated by the Tether Limited company since 2014.
The USDC stablecoin was introduced in 2018. Previously called USD Coin, this crypto is issued by the Centre Consortium, a joint venture between Coinbase and Circle.
Explore our guide to discover the differences and similarities between USDT and USDC.
What Is USDT?
USDT is the largest stablecoin in the cryptocurrency market. Also called Tether, it's been operated by the Tether Limited company since 2014. Tether is pegged to the U.S. dollar, and is backed by a blend of gold and fiat currency.
What Is USDC?
USDC is a stablecoin that was introduced in 2018. Previously called USD Coin, this crypto is issued by the Centre Consortium, a joint venture between Coinbase and Circle. USDC is backed by the U.S. dollar and U.S. Treasury securities. Its value is pegged to that of the U.S. dollar.
USDT vs. USDC: Differences and Similarities
A single USDT or USDC token might have roughly equivalent values, but this doesn't mean they're interchangeable. There are many different factors to consider if you're looking for the differences between USDC and USDT.
Design
Both USDT and USDC are fiat-backed stablecoins pegged to the U.S. dollar. This means that they're set up to always have the same value as the American dollar. To help with this goal, their parent companies hold a reserve of dollars to guarantee the value of their coins.
However, USDC has some additional backing that USDT doesn’t have. In addition to its reserve of dollars, it also holds some U.S. Treasury securities. These cash-equivalent assets provide an extra level of security for USDC.
Age
USDT is significantly older than USDC. It was launched in 2014, whereas USDC didn’t exist until four years later. USDT also happens to be the first fiat-backed stablecoin in existence. By the time USDC arrived, USDT was already an industry leader with years of brand recognition.
Popularity
USDT and USDC are both leaders in the stablecoin markets. For many years, they've routinely outranked their competitors. However, USDT still leads USDC by quite a large margin, with an approximate market capitalization of $110 billion as compared to USDC's $33 billion.
Keep in mind that while USDT is traded more by investors, USDC might be used more for web3 transactions. Data from Visa suggests that in 2024, USDC began to outpace USDT as the preferred choice for stablecoin crypto payments.
Redemption Options
Both USDT and USDC offer the option to redeem stablecoins. As part of their mission to demonstrate that stablecoins are just as reliable as fiat currency, their users can trade their stablecoins for U.S. dollars. However, USDT’s redemption capabilities are somewhat more limited. Users can only redeem funds when they hold at least 100,000 USDT, while USDC users can redeem funds as soon as they hold 100 USDC. In addition, users report that USDC's redemption process is simpler and faster.
Transparency
When it comes to transparency, USDT and USDC have drastically different outlooks. Over the years, USDT has faced many claims about misleading investors. There have been rumors of price manipulation, as well as assertions that Tether doesn’t actually hold the amount of reserves it claims to possess. These concerns regarding transparency have been partially proven in investigations. At one point, Tether was fined by regulatory bodies for holding the reserves that it claimed to have in place only 27.6% of the time. Additionally, concerns were raised as to the specifics and integrity of its holdings.
Meanwhile, USDC has been fairly committed to transparency. It uses an independent company that audits its reserves and releases reports to the public on a monthly basis. Compared to Tether's quarterly audits, USDC's audits are more frequent, and provide a more detailed breakdown of its asset reserves.
Reputation
When it comes to reputation, each of these stablecoins has its pros and cons. USDT is usually seen as an icon within the stablecoin industry, being one of the first and also most recognizable. When users are discussing stablecoins, Tether invariably comes up. Unfortunately, USDT has also had some prominent public relations failures that make investors more wary of its brand.
USDC doesn't have quite as many fans as USDT, and it's viewed as less of a trailblazer. However, its many fans point out that it's much more reliable than Tether. USDC was created partially in reaction to Tether's transparency issues, so investors often speak of it as the safer, more secure option.
Price
As stablecoins, USDC and USDT are both generally valued around $1. However, stablecoins don't generally maintain a value of precisely $1 all of the time. Not only are there occasional fluctuations, such as a coin's price dropping to (for example) $0.9996, but situations can also arise in which prices become drastically altered. These incidents, called depegs, can greatly destabilize the market.
Both USDC and USDT have experienced infamous depegging incidents. While USDT has dropped as low as $0.99, USDC has gone all the way down to $0.87. Although both coins have managed to easily recover in value, any fluctuation can cause problems for investors. Analysis suggests that USDC has had slightly more frequent depegs than USDT.
Regulatory Compliance
Both USDT and USDC claim to follow international financial compliance measures. This means they follow industry best practices for protecting both their funds and their consumers. However, USDT's claims are a little more difficult to verify as compared to those of USDC, whose audits show that its reserves are held within regulated financial organizations so that it can prove it follows laws and recommendations for protecting its investors.
Uses
USDC and USDT are both known for their flexibility. They run on multiple blockchains and are used as currency at a variety of traditional and web3 businesses. Though USDT has greater liquidity and supply than USDC, both coins have liquidity large enough to easily support vast amounts of trading.
There are some differences in where these coins are available. USDT operates on 12 chains, including Ethereum, Omni, TRON, Algorand and EOS. Meanwhile, USDC is natively supported on 16 chains, including Ethereum, Solana, Pokadot, Flow, Avalanche, Base and others. Regardless, even if USDC is on more chains, USDT is accepted by almost twice as many businesses.
Which Is Better: USDT or USDC?
As you can see, USDT and USDC both have their own pros and cons. When it comes to USDC vs. USDT, the right choice for you will simply depend upon your priorities and how you plan to use the coin.
USDT or USDC — Which Is a Better Investment?
Stablecoins don't shift a lot in price, so neither USDT nor USDC will avail you of the potentially wild profit increases of some other types of cryptocurrencies. However, they still have a lot of uses in the DeFi investment world. Both USDT and USDC are popular choices for investors who choose to participate in staking, borrowing, lending and liquidity provision.
When it comes to investing, USDT has a slight edge over USDC. Either one can work well, but USDT simply has a much larger market share. Its larger supply and trading volume and higher market cap all lead to more opportunities for investors. Furthermore, USDT's popularity means it's used in more web3 projects. This all contributes to making USDT more available when you want to use DeFi investing to earn passive income on your tokens.
Meanwhile, although USDC's slightly more frequent rates of depegging might make it seem scary for an investor, depegging also comes with some opportunities for profit. Not only can you try to use options to short the coin, but you can participate in various token swaps and make money off the minor differences in stablecoin prices. However, even if USDC is useful for these sorts of techniques, keep in mind that arbitrage bots, options and other similar investment strategies can be especially risky. Often, only advanced traders who invest at optimal moments end up profiting.
Which Should You Pay With — USDT or USDC?
If you plan on using either of these stablecoins to buy more crypto or make other purchases, USDC is often the better choice. The coin has a better track record for transparency and regulatory compliance. Furthermore, it's easier to convert your USDC back into U.S. dollars, which makes it a flexible payment choice.
The other primary consideration is USDT's widespread adoption. Even if USDC makes more sense as a payment method, some businesses only accept USDT. Therefore, if you can only choose one stablecoin and want to be able to spend it in many locations, USDT might be the better pick for you.
Which Will Be Better in the Future?
If you prefer long-term planning, it's essential to consider the futures of both USDC and USDT. Right now, USDT's popularity makes it the go-to option for many activities. However, more and more crypto enthusiasts are becoming wary of Tether. USDC’s reputation as the safer option might serve it well in the future.
Industry data paints an intriguing picture of which coin is on the rise. Not only has USDC been used for more transactions in the past year, but the summer of 2024 has led to big changes for this token. When Circle became the first stablecoin to receive approval from European regulators, traders took note, and tremendous growth in trading volume took place for USDC. By the end of July, volume was up to $135 billion and market cap had grown by 5.4%.
This has led to a lot of speculation about Tether finally being outpaced by USDC. Crypto trends suggest that regulation will become even more common in the future — and USDC is already doing a great job of satisfying regulations. Unless USDT is able to greatly improve its security and transparency, it may struggle to keep up.
The Bottom Line
Ultimately, both USDT and USDC have many reasons to hold their positions at the top of the stablecoin market. While USDT is an industry icon that holds large market shares, USDC has managed to become one of the most reliable and transparent choices. Currently, there's no definitive decision on which one is better, but rising interest in USDC suggests it might be the stablecoin of the future.
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