In the world of digital assets, stablecoins play a crucial role by offering a way to maintain value without the extreme price fluctuations common in other cryptocurrencies. They are digital currencies designed to maintain the same value as a real-world asset, most often a fiat currency like the US dollar, euro, or Japanese yen. This makes them a reliable store of value and a trusted medium of exchange.
Today, we will focus on two of the most popular fiat-backed stablecoins: USD Coin (USDC) and Tether (USDT). We will explore their key differences to help you decide which stablecoin might better suit your investment needs. Let's discover if you need to switch from USDC to USDT, or vice versa.
What Are Stablecoins?
As mentioned, stablecoins get their name because their value remains stable; they are designed to maintain the price of a specific asset. The underlying asset can be practically anything—fiat currencies, other cryptocurrencies, or even precious metals. However, fiat-backed stablecoins are the most popular, as the financial and crypto markets generally measure value in US dollars.
Main Types of Stablecoins You Should Know
Stablecoins can be categorized by their governance structure:
- Centralized
- Decentralized
- Algorithmic
The primary types of stablecoins, based on what backs them, are:
- Fiat-backed: Supported by currencies like the US dollar (Tether (USDT), USD Coin (USDC)) or the euro (EURT). The companies issuing these stablecoins hold funds in bank accounts or with trusted custodians, matching the number of stablecoins in circulation.
- Crypto-backed: Assets like Maker DAO, created on the Ethereum network and backed by other cryptocurrencies.
- Commodity-backed: Secured by precious metals or commodities, such as Tether Gold (XAUt).
- Algorithmic stablecoins: These are not guaranteed by any asset. Their value is automatically adjusted based on supply and demand volume. A notable example was UST from the Terra project.
Each type of stablecoin has its own characteristics and differences. Fiat-backed stablecoins are popular among everyday investors who trade cryptocurrencies or invest with short and long-term goals. After realizing a profit, they often move into stablecoins to protect their gains. On the other hand, tokens fully backed by cryptocurrencies are more commonly used by crypto enthusiasts, developers, venture capitalists, and long-term investors.
USDT and USDC: Key Aspects to Know
USDT and USDC are the two most popular stablecoins in the cryptocurrency ecosystem, both with their values pegged to the US dollar. They are widely used in the crypto market for trading, investing, storing value, and converting between each other. Let's take a closer look at these two dollar-pegged stablecoins to define their key differences.
What Is Tether (USDT)?
- Supported Blockchains: Ethereum, TRON, BSC, and over 15 other networks
- Type: Fiat-backed stablecoin
- What Maintains Value: Reserve assets in bank accounts, commercial paper, and other assets
- Market Capitalization: $66,096,483,995
- Launch Year: 2015
Tether (USDT) is a peer-to-peer blockchain system and an open-source cryptocurrency. It is considered one of the most secure stablecoins in the crypto ecosystem, with its value pegged to the US dollar. Market fluctuations hardly affect its rate, although in 2017, Tether's price history recorded a brief surge of 21%, with the value rising to $1.22. This can happen during periods of high market volatility, but the value usually stabilizes quickly.
It is also worth noting that Tether is the most popular stablecoin. Nearly all cryptocurrency platforms and wallets support it as an alternative to traditional deposit and withdrawal methods to a bank account. For users, Tether offers several benefits, such as easy transfers between wallets and crypto platforms and a reliable store of value or medium of exchange.
The History of Tether's Creation
Tether was designed to provide the crypto market with a stablecoin linked to the US dollar. Its journey began in 2014 when Tether Limited developed the technology to run on the Bitcoin blockchain using the Omni Layer protocol.
The idea was to offer a digital asset with the benefits of cryptocurrencies but without the strong price swings. Because Tether is always tied to the US dollar, the value of USDT is highly predictable and remains constant, exactly as the developers intended.
Tether Limited is responsible for ensuring that USDT tokens maintain a stable backing in an equal amount of fiat currency or other reserves. They are required to regularly disclose reports to confirm the existence of these reserves, although there has been some criticism regarding the transparency of these reports.
The company also manages and controls the issuance of the coins, ensuring it meets regulatory requirements and follows Anti-Money Laundering (AML) and Know Your Customer (KYC) standards. Like USDC, Tether is centralized and can be frozen or seized if regulatory bodies deem a user's actions illegal.
How Does USDT Work?
As mentioned, Tether Limited guarantees that the tokens maintain a stable backing of reserves, including fiat currency, loans, bonds, and other reserve assets. Here’s how the process works:
- A user sends US dollars or another fiat currency to Tether Ltd.
- Tether creates the same amount of tokens and transfers them to the user's wallet.
- The received cash is held in reserve to sustain the value of the tokens.
The process works similarly when redeeming tokens:
- A user sends their tokens to Tether Ltd.
- Tether burns the same number of tokens and sends the user the equivalent value in US dollars (or other fiat currency), charging a small fee.
Tether publishes regular reports on its reserves to maintain confidence, although there are often concerns about the clarity and completeness of these reports.
Where to Buy and Store USDT Stablecoin?
You can buy Tether (USDT) on most cryptocurrency platforms, both centralized and decentralized. Some popular options include major global exchanges. For storage, you will need a wallet that supports the ERC-20, TRC-20, or other blockchain networks on which USDT stablecoins operate. Popular wallets include hardware options like Ledger and Trezor, as well as software wallets like Trust Wallet, Exodus, and MetaMask.
Since the stablecoin is available on various blockchains, users can benefit from lower transaction fees. 👉 Explore secure trading platforms to find a full list of supported wallets and exchanges.
Key Advantages and Disadvantages of USDT Stablecoins
Pros
- Value stability
- High liquidity
- Supported by nearly all crypto platforms
- Available on multiple blockchains, helping to reduce fees
Cons
- Lack of anonymity
- Centralized control
- Unclear reserve transparency
What Is USD Coin (USDC)?
- Supported Blockchains: Ethereum, Solana, Avalanche, and 12 other networks
- Type: Fiat-backed stablecoin
- What Maintains Value: Equivalent fiat currency in bank accounts
- Market Capitalization: $27,262,310,467
- Launch Year: 2018
The USD Coin or USDC is a widely used stablecoin in the cryptocurrency ecosystem, known for its transparency and liquidity. USDC is issued by Circle in partnership with the crypto platform Coinbase. It is the second most liquid stablecoin after Tether and is traded on most major platforms.
Circle Ltd. is licensed and regulated by the NYDFS (New York Department of Financial Services), one of the strictest financial regulators in the US. The company has raised significant funds and is well-supported by venture capital. However, it is worth noting that USDC is a largely centralized stablecoin, meaning it can be frozen or confiscated if regulators determine the use of USD Coin is illegal.
The History of USD Coin's Creation
Circle and the Centre Consortium launched USD Coin (USDC) to tokenize US dollars for use on public blockchains. Thanks to the open ERC-20 standard, USDC integrates easily with existing services, and it is supported by over 100 crypto platforms, wallets, and applications.
USDC is the Centre Consortium's first stablecoin, and Circle was the first company to issue it. Its goal is to make transferring fiat currency as simple as browsing the web or sending a message. To ensure transparency and compatibility, Circle helped create the Centre, which defines the rules for fiat-backed stablecoins. USDC is built on the principles of openness and accountability, as described in the Centre's standards. To issue USDC, companies must:
- Be licensed to handle money transfers or banking services.
- Undergo AML compliance audits and meet FATF standards.
- Allow the exchange and redemption of USDC tokens with other authorized issuers.
- Maintain full reserves for all tokens issued and provide monthly reports verified by independent auditors.
Coinbase also contributed to the creation of USDC, aiming to build an open financial system for people and businesses worldwide. USD Coin offers users without full access to the traditional banking system a way to hold digital assets pegged to the US dollar.
How Does USD Crypto Work?
The process of turning the US dollar into stablecoins in USD is called tokenization. Circle ensures that USD Coin remains a fiat-backed stablecoin. There are three steps in tokenization:
- The user transfers dollars to the issuer's bank account.
- The issuer creates an equivalent amount of USDC using a smart contract. The token is divisible, so you can create and store as little as 0.000001 USD Coin.
- The newly created USD Coin is transferred to the user, while the USD is held in reserves.
The reverse process works as follows:
- The user sends USDC to the issuer's smart contract address.
- The issuer requests the smart contract to remove the equivalent values of USD Coin from circulation.
- The issuer sends the corresponding value in USD currency from its reserves to the user's account, minus any applicable fees.
All issuers are required to regularly report their dollar reserves, which are made publicly available.
Where to Buy and Store USDC Stablecoin?
You can buy USD Coin or exchange USDC for USDT on many cryptocurrency platforms, including both CEXs and DEXs. For storing USD Coin, you can use popular wallets like Atomic Wallet, Coinomi, Exodus, imToken, and Trust Wallet.
Since the USD stablecoin runs on the popular ERC-20 standard, you have many options for working with it. Check the official website for a complete list of supported digital wallets, DeFi platforms, and decentralized financial protocols. 👉 Get advanced wallet methods for managing stablecoins.
Key Advantages and Disadvantages of USDC Stablecoins
Pros
- Built on the popular Ethereum blockchain
- Available on major crypto platforms
- High liquidity, second only to Tether's USD stablecoin
- Strong regulatory compliance with monthly audits
Cons
- Highly centralized
USDC vs. USDT: Key Similarities to Know
Although USDT and USDC are two separate fiat-backed stablecoins with many differences, they share several common traits that make them popular among users.
USDC and USDT: Fiat-Backed Stablecoins
Both USDT and USDC cryptocurrencies were designed to maintain a 1:1 parity with the US dollar, making them a reliable medium of exchange and a store of value.
USDT vs. USDC: Centralization
Both USDT and USDC cryptocurrencies are centralized and issued by the companies Tether and Circle, which helps them maintain their parity with fiat currency. However, this also means the stablecoins can be frozen or seized if the issuer determines a user's actions are illegal.
USDT and USDC: Widely Used Stablecoins
Both USDT and USDC cryptocurrencies are available on most major CEXs and DEXs, offering high liquidity, flexibility, and stable value. They are also supported by many cryptocurrency wallets, giving users plenty of options for storing and managing their USDT or USDC.
Key Differences Between USDT and USDC
Although USDT and USDC have much in common, there are some important differences to consider. Your choice—USDT or USDC—depends on your investment goals. Let's look at the main differences between the USDT and USDC cryptocurrencies.
USDC vs. USDT: Issuance and Reserve Asset Backing
- USDT vs. USDC: The reserve assets for USDT (Tether) include fiat currency, loans, and bonds. However, the company does not offer many details about what makes up its reserve storage, which has raised concerns for some users and regulators.
- USDC vs. USDT: Unlike Tether, USD Coin issuers are required to hold reserve assets only in cash and short-term government bonds. Circle provides monthly audits, increasing confidence in the stability of USD stablecoins.
USDC vs. USDT: Transparency Differences
- USDC vs. USDT: Although Tether Ltd. regularly states that USDT is a USD-backed stablecoin, its reserve transparency is often questioned. The details of the reserve are not always fully disclosed, which poses some risk for investors.
- USDC vs. USDT: USD Coin (USDC) is known for its transparency. Circle publishes monthly reports and is committed to complying with financial regulations.
USDC vs. USDT: Liquidity Volume
- USDT vs. USDC: USDT is the most liquid and widely used stablecoin, with a larger market capitalization and trading volume. It is supported by almost all major cryptocurrency platforms.
- USDC vs. USDT: Although USDC is the second most liquid fiat-backed stablecoin, its market capitalization and trading volume are smaller. Still, it is available on most major cryptocurrency platforms.
USDC to USDT: Regulatory Aspects
- USDT and USDC: Despite its popularity, USDT (Tether) faces regulatory scrutiny. Tokens can be frozen or confiscated if the company behind them believes the stablecoins were used illegally.
- USDC and USDT: Circle operates under strict regulatory supervision and must comply with norms, which increases the credibility of USD Coin. However, tokens can also be frozen if requested by authorities.
USDC to USDT: Difference Table
| Key Difference Metrics | USDT (Tether) | USDC (USD Coin) |
|---|---|---|
| Issuer | Tether Limited | Circle and Coinbase (Centre Consortium) |
| Launch Year | 2015 | 2018 |
| Market Value | $66,096,483,995 | $27,262,310,467 |
| Circulating Supply | 83 Billion | 41 Billion |
| Daily Trading Volume | $50+ Billion | $5+ Billion |
| Blockchain Support | 20+ Networks | 15 Networks |
| Type | Fiat-Backed | Fiat-Backed |
| Stability Mechanism | Pegged to USD; guaranteed by Tether's reserves | Pegged to USD; guaranteed 1:1 with USD in reserves |
| Collateral Type | Backed by a combination of assets, including traditional currency, cash equivalents, and other reserves | Fully backed by cash and short-term U.S. Treasury bonds |
| Liquidity | Highest among stablecoins | Second highest |
| Regulatory Compliance | Less regulated, facing some scrutiny | Fully compliant with U.S. regulations |
| Centralization | Centralized, can freeze digital assets | Centralized, can freeze digital assets |
| Reserve Audits | Reserve reports published quarterly, but criticized for lack of detail | Monthly audits of reserves by certified auditors |
| Transparency | Limited, periodic reports on asset reserve published quarterly | Monthly audits, highly transparent |
| Primary Use Cases | Trading, arbitrage, payments, cross-exchange transfers, DeFi protocols | Trading, arbitrage, payments, cross-chain transfers, DeFi protocols |
| Supported Wallets | Supported by over 100 wallets | Supported by over 100 wallets |
| Supported Exchanges | Listed on over 200 exchanges | Listed on over 150 exchanges |
Conclusion
We have explored the key differences between two of the most popular digital tokens with a stable value—USDT (Tether) and USDC—to help you make an informed decision. Both tokens maintain a stable rate and serve as a reliable medium of exchange due to their peg to the dollar, making them attractive to many users in the crypto ecosystem. Ultimately, the need to switch from USDC to USDT or vice versa depends on your individual needs and priorities.
Frequently Asked Questions
What is the main difference between USDT and USDC?
The main difference lies in their transparency and reserve backing. USDC is known for its high level of transparency with monthly audited reserves held in cash and short-term bonds. USDT's reserves are a mix of assets, including commercial paper, and its quarterly reports have faced scrutiny over their detail and clarity.
Is it safe to hold USDT or USDC long-term?
Both are generally considered safe for holding value due to their peg to the US dollar. However, USDC is often viewed as having a lower risk profile because of its stricter regulatory compliance and transparent, audited reserves. USDT carries a slightly higher perceived risk due to past questions about its backing, though it remains the most liquid stablecoin.
Can USDT or USDC be frozen by the issuer?
Yes. Both USDT and USDC are centralized stablecoins. This means the issuing companies (Tether and Circle) have the ability to freeze tokens in specific wallets if required by law enforcement or if they suspect illegal activity like money laundering or fraud.
Which stablecoin has better liquidity, USDT or USDC?
USDT has significantly higher liquidity than USDC. It boasts a larger market capitalization, a greater circulating supply, and a much higher daily trading volume. This makes USDT easier to trade instantly on virtually any exchange with minimal price impact.
On how many blockchains are USDT and USDC available?
Both stablecoins are available on multiple blockchains to improve accessibility and reduce transaction fees. USDT is supported on over 20 networks, including Ethereum, Tron, and Solana. USDC is available on 15+ networks, such as Ethereum, Solana, and Avalanche.
Which stablecoin should I use for DeFi protocols?
Both USDT and USDC are widely integrated into DeFi protocols for lending, borrowing, and providing liquidity. Your choice may depend on the specific protocol's supported assets and the trading pairs you need. Always check which stablecoin offers better yields or lower slippage for your intended use case.