USDT and USDC are popular dollar-pegged stablecoins, but which is better in 2024?
Key Takeaways:
- USDT and USDC are similar because they are both dollar-pegged stablecoins built on Ethereum that now serve multiple networks.
- Built by Tether, USDT is more widely accepted by crypto service providers and has been more stable.
- Created by Circle, USDC goes through regular audits and is considered more transparent than USDT.
- Both stablecoins fulfill their purpose well, so the best choice between USDT and USDC depends on your preferences.
USDT vs. USDC: An Overview
USDT
Launched in 2014, Tether (USDT) is the first stablecoin. Built on Ethereum but now severing several networks, including Solana and Avalanche. USDT is the world’s largest stablecoin and is commonly used to denominate assets on crypto exchanges. A financial systems company called Tether built and currently manages USDT.
As reported on the Tether website, approximately 112,606,076,384 tokens are in circulation. The company maintains a 1:1 USDT cash reserve.
Although Tether has faced criticism for its lack of transparency and incorrectly reporting its reserves, the company states that it holds 84% of its reserves in cash/cash equivalents. However, Bitcoin, secured loans, and precious metals also form a significant part of USDT’s reserves.
USDC
Released in 2018, USD Coin (commonly known as USDC) is a US Dollar-pegged stablecoin. Created by the peer-to-peer payments company Circle, USDC is designed to facilitate payments, trading, and cross-border transactions. It is fully collateralized, with transparent reserves, and holders can redeem the token 1:1 for USD.
According to the Circle website, as of June 13th, there were $32.5 billion USDC in circulation, and the company boasted cash and cash equivalent reserves totaling $32.6 billion. A significant benefit of USDC is its transparency. The project discloses its reserves weekly and undergoes monthly audits by the leading firm Deloitte & Touche LLP.
The Benefits of USDT
- Longer Standing - USDT has been operating since 2014, making it the market’s longest-running stablecoin.
- Larger Market Cap - As USDT has a market cap over 300% larger than USDC, the asset should be more resilient.
- Less Severe De-Pegging Incidents - Compared to USDC, USDT’s de-pegging issues have been much less extreme.
- More Widely Accepted - While both stablecoins are popular, USDT is more widely accepted.
- Relatively Fast Transfer Times - While both have broad support for different blockchains, the popularity and transfer time of USDT of less than 10 minutes on the Ethereum network is appealing.
The Cons of USDT
- Transparency-Related Issues - The Commodity Futures Trading Commission (CFTC) has previously fined Tether for misleading customers about its reserves.
- Regulatory Scrutiny - USDT has been in hot water with regulators numerous times.
The Benefits of USDC
- Superior Transparency - While USDT has had issues, USDC is regularly audited and has not faced any transparency problems.
- US Company - Circle is based in Boston, Massachusetts. Unlike USDT, which is based in the British Virgin Islands, USDC is subject to US rules and regulations.
- Regulatory Status - USDC works closely with regulators to ensure its compliance.
The Cons of USDC
- Significant De-Pegging Incidents - USDC has faced several substantial de-pegging incidents, pushing its price below $1.
- Less Widely Accepted - USDC is the second largest stablecoin, but it’s supported less commonly than USDT.
USDT vs. USDC: Security and Transparency
Security is an important consideration when selecting a stablecoin. Unfortunately, USDC and USDT have both faced challenges in the past regarding de-pegging incidents in which the stablecoin’s value has dropped below $1.
A notable de-pegging occurred following the collapse of Silicon Valley Bank around May 2023. As USDC’s parent company, Circle, had around $3.3 billion in Silicon Valley Bank, the USDC token dropped to $0.88, but it regained its peg following assuring statements from Cricle’s CEO Jeremy Allaire.
USDT has also experienced de-pegging incidents, but they have been less severe. The asset usually drops by a few cents and re-pegging quickly. However, USDT has been scrutinized for its lack of transparency and was fined $41 million in 2021 for misleading customers regarding its reserves.
Choosing Between USDT and USDC
If you’re still unsure which is right for you, the best way to choose between USDT and USDC is to consider the pros and cons of both assets and weigh those against your own preferences. For example, if transparency is paramount to you, USDC could be superior. However, USDT could be the better option if broader acceptance is critical.
USDT vs. USDC — Final Verdict
USDT and USDC are the two largest stablecoins on the market, and each excels in different areas. While they perform the same role, providing a dollar-pegged crypto asset, USDC offers greater transparency and regulatory clarity. Conversely, USDT is more widely accepted and has experienced less extreme de-pegs.
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