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USDT vs USDC: Which stablecoin should you use?

Find out the benefits of USDT and USDC and what separates these two leading stablecoins.

12 Nov 2021by Corey Barchat

Crypto volatility exists for every token you can think of, from Bitcoin to Shiba Inu. Just as they can experience euphoric rises, cryptocurrencies can also see their price plunge overnight.

To combat these price swings, stablecoins have emerged as a reliable way for investors to remain in the crypto ecosystem at much lower risk. Pegged to a real-world asset—usually a fiat currency— stablecoins offer resistance against the fluctuations to which other coins are susceptible.

Tied to the US Dollar, both USD Coin (USDC) and Tether (USDT) have emerged as the leading stablecoins, consistently leading the market and appearing in nearly every major cryptocurrency exchange, wallet, and application.

If you’re considering which stablecoin is a better fit for your needs, it helps to understand how each one functions. Learn more in this article about the differences between USDC and USDT.

What is a stablecoin?

A stablecoin is a cryptocurrency whose value is backed by an external asset, such as the US Dollar

For a long time, Bitcoin and early cryptocurrencies could only be exchanged for other cryptocurrencies or fiat currencies. If you wanted to swap your coins, there was no way for crypto holders to move into a fiat-backed asset without exiting the crypto ecosystem altogether. This is where stablecoins stepped in.

Many crypto traders utilize stablecoins in order to remain in the ecosystem by holding an asset with a constant price. A less volatile digital currency by design, you can exchange them 24 hours a day without having to cash out to your bank. These tokens will always hold their current value, as long as the backing ratio remains true.

Why are there so many USD stablecoins?

With multi-billion-dollar market capitalizations, USDT and USDC are the most popular stablecoins used today. But they are not the only ones. 

Binance has their own stablecoin (BUSD) and Dai (DAI) is an Ethereum-based one, designed to function specifically on those networks. Just like USDC and USDT, both of these coins will always equal $1, but that doesn’t mean they are completely interchangeable—the one you choose to purchase will depend on which blockchain and applications you wish to interact with.

A graphic showing a dollar and the many USD stablecoins that exist.

USDT and USDC are two of the main stablecoins (Image source)

What is USDT?

USDT was first issued by Hong Kong-based Tether Limited in 2014 in order to bridge the gap between crypto and fiat. For the first time, Tether gave users access to a platform-agnostic, blockchain-based US Dollar that held many of the technical advantages of Bitcoin, Ethereum, and other crypto assets, with their high liquidity but none of their volatility. 

By tapping into the best of both worlds, Tether created a permissionless way to send crypto-dollars to anyone with speed, transparency, and low cost, opening up the use case of cryptocurrencies to remittances, payments, and more.

Upon its release, hundreds of cryptocurrency trading pairs began listing against USDT, giving the coin a first-mover advantage in the stablecoin market. Today, there are 74.7 billion USDT tokens circulating on most major blockchains, including Bitcoin, Ethereum, EOS, Algorand, Tron, and more. USDT is the crypto market's most popular trading pair, and can be used on exchanges to buy or swap for hundreds of other cryptocurrencies.

USDT allows anyone to transact cheaply and quickly, and earn interest on decentralized finance protocols. It also gives merchants a way to accept cryptocurrency payments denominated in fiat, without the need for taking on market risk associated with accepting payments in the form of more volatile cryptocurrencies.

USDT volume

USDT sits in the 4th position of all coins in market cap at $74 billion. It is the most heavily traded coin with a 7-day trade volume of $93.9 billion and $2.3 trillion in the past 30 days, more than double that of Bitcoin.

A graph of USDT’s market capitalization increasing over time.

Tether (USDT) has seen a steadily increasing market capitalization (Image source)

USDT stability

By design, USDT's dollar value will normally stick to a stable value of $1. While there can occasionally be slight fluctuations in price of a few cents, the market rapidly corrects itself to return to its $1 fixed price. 

What is USDC?

USDC is a stablecoin created by Coinbase and Circle in 2018. Like USDT or any other USD-backed token, its price remains fixed at $1.

The coin is governed by the Centre Consortium, which oversees the technical and financial standards for the stablecoin and ensures that there is transparency around a true 1-to-1 backing. This means that for every USDC created, $1 of USD is held in reserve in the form of US Dollars and other cash equivalents.

There is currently a circulating supply of 34.6 billion USDC, with an equal dollar amount in reserve. USDC can be issued by approved regulated financial institutions that meet Circle’s membership framework, which allows for the growth of the USDC ecosystem.

USDC is available on most major exchanges and cryptocurrency providers. Like USDT, USD Coin can be sent and received by any wallet or exchange that is ERC-20 (Ethereum) compatible, along with many other blockchains such as Algorand, Stellar, Binance Smart Chain, Hedera, Tron, Solana, and more.

USDC volume

USDC ranks 11th in market cap at $34.7 billion, nearly half of USDT’s total. Its 7-day trade volume is $5.5 billion and $90.5 billion traded in the past 30 days.

A graph of USDC’s market capitalization increasing in 2021.

USD Coin (USDC) is newer than Tether (USDT), but is following suit in market capitalization (Image source)

USDC stability

USDC remains stable at approximately $1. Just as there can be slight fluctuations with any stablecoin, these are quickly corrected, bringing it back to the same $1 price.

USDT vs USDC

While USDT is used more frequently for trading and payments, USDC is often described as a safer stablecoin since Centre makes a greater effort to comply with audits and governmental regulation, and has more transparent, fully-backed reserves.

A table showing the differences between USDC vs USDT.

USDC vs USDT at a glance.

Trading pairs

Both USDT and USDC are popular choices to be used as trading pairs on DeFi (decentralized finance) protocols. With USDT’s 4-year head start, they have long been the most widely-used stablecoin with the highest consistent trading volume. USDC has since closed the gap somewhat, and is now available on many of the same blockchains as Tether.

Safety and transparency

USDT has received some scrutiny due to Tether’s hesitance to release complete and frequent updates on how the coin is backed. On the other hand, USDC’s parent company Centre Consortium has consistently complied and positioned themselves well in regard to regulations, releasing regularly audited reports on their reserves.

Although they eventually released a breakdown of their reserves in March, 2021, Tether fought to prevent their reserve composition from going public, even going so far as asking the New York Supreme Court to block the state Attorney General from releasing documents to CoinDesk after the latter filed a Freedom of Information Law (FOIL) request.

Since then, Tether has taken steps to become more transparent by publishing the contents of their reserves and providing daily updates. While this is a good start, there are still some, such as the Commodity Futures Trading commission, calling on Tether to perform a full audit.

A pie chart breaking down Tether’s asset reserves.

Tether released the first breakdown of their reserves on March 31, 2021 (Image source)

USDC, on the other hand, is playing it safe by complying in order to position themselves for potential future government regulations. Circle releases monthly audits into their reserves by accounting firm Grant Thornton LLP. They also pledged to only own US dollars and short term treasury bills, and may even apply for a national charter to start their own digital bank.

“There’s a reason why USDC is regulated and supervised by banking regulators under the same laws that supervise the balances you hold on PayPal or with Apple or with Square,” Circle CEO Jeremy Allaire told the Brookings Institute. “Those things have applied to us since day one. And those statutes exist so that people have confidence in these electronic payment systems. And I think that’s really important.”

Potential regulation?

The Biden administration recently published a report calling for greater regulation of stablecoins, and the Treasury Department has pressured Congress to pass legislation requiring stablecoin issuers to become insured depository institutions (similar to a bank). 

With the threat of stablecoin regulation looming, it’s vital that issuers take the precautionary steps necessary to not be caught off guard once such laws are passed. Releasing consistently audited reserve reports is a good place to start.

Should I use USDC or USDT?

If you’re interested in participating in a specific blockchain or DeFi protocol, then you’ll need to make sure the stablecoin you select is supported on that network. USDC and USDT can both be used for lending, staking, and providing liquidity for trading pairs, though the returns and functionality for each may vary.

Here are a few other things to consider when deciding which stablecoin to buy:

Earn interest on USDC and USDT

DeFi offers similar services to what you can get with a bank account. One such option is to earn interest by lending your tokens on a variety of platforms. By including stablecoins in your investment portfolio, you can benefit from higher APY on less risky digital assets.

While interest rates change on a regular basis, in most cases you will still earn more by lending your stablecoins than you would by keeping your dollars in a traditional savings account. Additionally, you’ll have complete control when choosing where to invest your money compared to doing so with a standard bank.

A screenshot of the most popular USDC lending platforms and their associated interest rates.

Current interest rates for lending USDC (Image source)

DeFi Rate is one tool where you can view current APY on different coins. The top ten lending providers here offer interest rates ranging between 2-9% for lending USD Coin, with an average of 4.4% monthly APY.

A screenshot of USDT interest rates on Staking Rewards.

You can lend your USDT for interest (Image source)

Staking Rewards is one of many tools you can use to view current USDT lending rates. The average APY here is significantly higher than it is for USDC, with APY as high as 150.58%. 

Of course, there are always risks associated with such lofty potential returns, and it’s important to always do your own research to understand each platform and financial instrument.

How to buy USDT or USDC

With MoonPay, you can purchase USDT or USDC in seconds with your credit / debit card, bank transfer, Apple Pay, Samsung Pay, or Google Pay. No waiting around for days while your funds settle.

HS art

MoonPay allows you to buy USDT and USDC in seconds

USDC vs USDT: Final thoughts

USDC and USDT are but two of many stablecoins offered in the crypto ecosystem today. While USDT is the most heavily traded, its parent company Tether has been reluctant to comply with audits and investigations, and has skirted somewhat around the issue of inevitable regulation. While you can earn high returns on your USDT investment, there has long been some uncertainty surrounding Tether’s backing of the coin.

USDC, on the other hand, has been diligent in planning ahead for potential government oversight into stablecoins. You can still buy and lend your USD Coin for a comfortable gain, while knowing your downside is mitigated through the Centre Consortium’s compliance and monthly audits.