USDC vs. USDT: Discover Which Stablecoin Is Better for You

Cryptocurrencies are known for their wild price swings, making them tricky to use as a reliable way to save money or make everyday purchases. But many people don’t know that some cryptocurrencies are less volatile, and that’s where stablecoins come in—they were created to offer a more stable alternative. These digital currencies are tied to traditional fiat currencies, […]

USDC vs. USDT

Cryptocurrencies are known for their wild price swings, making them tricky to use as a reliable way to save money or make everyday purchases. But many people don’t know that some cryptocurrencies are less volatile, and that’s where stablecoins come in—they were created to offer a more stable alternative.

These digital currencies are tied to traditional fiat currencies, like the US dollar, or other underlying assets, like gold or commodities, to keep their value steady. Two of the most popular stablecoins are USDC and USDT.

This article will compare USDC vs. USDT to help you discover which option is better for your needs.

USDC vs. USDT: A Brief Overview

CriterionTether (USDT)USD Coin (USDC)
Price (at the time of writing)$1$1
Market Cap (at the time of writing)$138.21 billion$48.08 billion
Circulating Supply (at the time of writing)138.21B USDT48.08B USDC
Maximum Supply
BlockchainMultiple (Ethereum, Tron, Solana, etc.)Multiple (Ethereum, Tron, Solana, etc.)
Consensus MechanismVaries by blockchainVaries by blockchain
Cryptographic AlgorithmVaries by blockchainVaries by blockchain
Token UtilityStablecoin for trading, payments, and remittancesStablecoin for trading, payments, and remittances
FoundersTether Limited (Brock Pierce, Reeve Collins, Craig Sellars)Circle (founded by Jeremy Allaire and Sean Neville)
Launch Date20142018
Supporting ExchangesBinance, Coinbase, OKX, Kraken, Bitget, ByBit, Bitfinex, KuCoin, Crypto.com, Gate.io, HTX, MEXC, etc.Binance, Coinbase, OKX, Kraken, Bitget, ByBit, Bitfinex, KuCoin, Crypto.com, Gate.io, HTX, MEXC, etc.
CommunitiesX (Twitter)
YouTube
Telegram
Reddit
Instagram
Discord
X (Twitter)
YouTube

The Genesis of USDC vs. USDT

USDT, or Tether, was launched in 2014 and was one of the first stablecoins to hit the market. The idea behind Tether was to create a digital dollar that could move easily across the blockchain while being backed by real-world assets like cash and other reserves.

It started on the Bitcoin network using a protocol called Omni Layer but later expanded to other popular blockchains, such as Ethereum and Tron.

However, Tether’s path hasn’t been without bumps. In 2021, regulators fined it $41 million for not being clear about its reserves. Despite this, USDT remained the most popular stablecoin, thanks to its early start and wide acceptance, especially in decentralized finance (DeFi).

USDC, or USD Coin, was introduced by Circle and Coinbase in 2018, a little later. From the start, USDC focused on transparency and working within regulatory guidelines. Unlike USDT, USDC offers regular audits of its reserves, aiming to build trust by showing exactly what backs the coin.

Initially launched on Ethereum, it has expanded to other blockchains like Solana and Stellar.

While both USDT and USDC are used to provide stability in the fast-moving crypto industry, they’ve taken different approaches. USDT has gained users due to its early presence and wide use, even though it has faced some trust issues. USDC, on the other hand, appeals to those who value transparency and precise regulation.

USDT vs. USDC: Technical Comparison

Winner: USD Coin (USDC)

Blockchain, Architecture, and Consensus Mechanisms  

Tether (USDT) and USD Coin (USDC) operate across multiple blockchains, but their approaches and technical underpinnings differ.

As mentioned, USDT was originally launched on the Omni Layer, which runs on the Bitcoin blockchain, but it quickly expanded to support other networks like Ethereum, Tron, and Solana. This broad adoption allows USDT users to choose a network that best fits their needs, whether Ethereum’s smart contracts or Tron’s low-cost, high-speed transactions.

USDC, on the other hand, started on Ethereum and later integrated with networks like Algorand and Solana.

Both stablecoins depend on the underlying blockchain in terms of consensus mechanisms. USDT, depending on the network, can utilize Proof of Work (PoW), as seen with Bitcoin’s Omni Layer, or more modern mechanisms like Delegated Proof of Stake (DPoS) on Tron.

USDC primarily operates on blockchains that use Proof of Stake (PoS) or variations like Pure Proof of Stake (PPoS) on Algorand. This difference means that while USDT benefits from a wide array of consensus mechanisms, USDC focuses on networks with faster and more energy-efficient methods.

Scalability and Network Throughput

Both USDT and USDC operate on multiple blockchains, such as Ethereum, Tron, and Solana, and their scalability is affected by which blockchains are used.

On Ethereum, both face congestion with limited throughput (15-30 TPS). Tron offers better scalability for USDT with up to 2,000 theoretical TPS, while Solana provides the highest scalability for both coins, boasting up to 50,000 theoretical TPS.

USDC also benefits from Algorand’s efficient network, offering around 1,000 theoretical TPS. This makes both stablecoins suitable for high-throughput environments on these faster blockchains.

Programming Languages and Smart Contract Compatibility 

USDT was initially issued on the Omni Layer, which is built on top of the Bitcoin blockchain. This initial reliance on Bitcoin’s infrastructure limited its flexibility for smart contract applications.

However, USDT has expanded to multiple blockchains to enhance its usability, including Ethereum, Tron, and Solana. Despite this expansion, USDT’s core design isn’t inherently focused on smart contracts, and its functionality largely depends on the capabilities of the underlying blockchain.

In terms of programming languages, USDT’s reliance on various blockchains means it leverages the programming languages native to those platforms (e.g., Solidity for Ethereum and JavaScript for Tron).

On the other hand, USDC was designed with a stronger emphasis on smart contract compatibility from the outset. Initially launched on Ethereum, USDC is fully compatible with Ethereum’s robust smart contract ecosystem.

Beyond Ethereum, USDC has expanded to blockchains like Algorand, Solana, and Stellar, focusing on seamless smart contract functionality across these networks.

Regarding programming languages, USDC is deeply integrated with these same platforms as USDT but tends to have more structured support for developers creating smart contract-based applications due to its consistent focus on compliance and functionality.

MiCA Compliance Impact

Under the MiCA (Markets in Crypto-Assets) regulations, stablecoin issuers must secure e-money licenses to operate within the European Union. This is an important aspect we need to cover because this shift is expected to create different challenges and opportunities for USDT and USDC.

USDT, which has faced ongoing scrutiny regarding its reserve transparency and management, may encounter significant hurdles in aligning with MiCA’s strict regulatory standards. 

The lack of regular, comprehensive audits could make it harder for Tether to demonstrate full compliance, potentially limiting its access to European markets. These compliance challenges might lead to reduced trust and a preference for alternatives on European exchanges, impacting USDT’s liquidity and market share within the EU.

In contrast, USDC, with its focus on transparency and adherence to regulatory guidelines, is better positioned to navigate MiCA’s requirements. 

Managed by Circle and the Centre consortium, USDC already undergoes regular audits and has a track record of compliance, making it more likely to secure the necessary licenses swiftly. 

This proactive approach may give USDC an advantage in gaining and maintaining a strong presence in the European market, potentially leading to greater adoption and liquidity on EU exchanges.

Tether vs. USD Coin: Market Performance

Winner: Tether (USDT)

Market Capitalization

As of January 20, 2025, Tether (USDT) has a market cap of about $138.21 billion, making it the biggest stablecoin. Its widespread use on many exchanges and DeFi platforms helps keep it at the top. Due to its large presence in the crypto market, USDT is a popular choice for trading and holding.

USD Coin (USDC), with a market cap of around $48.08 billion, is smaller but still growing. Studies show that USDC adoption has been rising more rapidly than USDT, including outside of the US. 

While USDT leads in size, USDC’s focus on compliance gives it a strong and growing user base. 

Supply and Price Action 

As both USDT and USDC are fiat-backed stablecoins, their price is pegged to the US dollar, consistently maintaining a value of $1 as of January 20, 2025.

Tether (USDT) currently has a total supply of 141.43 billion USDT. Its supply is adjusted based on market demand, with new tokens issued or burned as needed to maintain the $1 peg. 

On the other hand, USD Coin (USDC) has a total supply of 48.07 billion USDC. Like USDT, USDC’s supply is dynamically managed to uphold its 1:1 backing with the US dollar. 

Trading Volume and Market Sentiment

As of January 20, 2025, Tether (USDT) sees a 24-hour trading volume of $244.7 billion, reflecting its massive liquidity and widespread use across exchanges and Decentralized Finance protocols. Despite ongoing concerns about transparency, USDT maintains strong demand, with market sentiment at 75% bullish, driven by its dominance in the stablecoin market.

USD Coin (USDC) has a lower trading volume of $21.74 billion but remains a key player, especially in institutional circles. Its market sentiment is more positive at 82% bullish, supported by its focus on regulatory compliance and transparency. 

De-pegging Incidents

Both Tether and USD Coin have experienced brief de-pegging incidents, during which their value dropped below $1. These occurrences, often triggered by market volatility or liquidity issues, raised user concerns. 

However, both stablecoins quickly recovered and returned to their intended $1 peg, demonstrating their resilience and the effectiveness of their backing mechanisms in stabilizing value during turbulent market conditions.

Adoption Rate

Launched in 2014, Tether (USDT) has achieved broader adoption than USDC, which entered the scene in 2018. Tether’s earlier market presence has given it a significant head start, enabling it to build a larger and more established user base over time.

Reserve Assets

As of the end of 2024, both Tether (USDT) and USD Coin (USDC) are backed by reserves of various assets, such as fiat currency and financial instruments. However, Tether has faced ongoing concerns about the transparency and stability of its reserves, with accusations of insufficient backing for its stablecoin.

Tether’s reserves comprise US Treasury Bills, which account for about 58%, cash and cash equivalents (9%), secured loans (9%), and other investments such as cryptocurrencies, corporate bonds, funds, and precious metals. 

On the other hand, USD Coin (USDC) follows a simpler reserve model. Around 75.6% of its reserves are held in US Treasuries, with the remaining 24.4% in cash at regulated banks. Circle, USDC’s issuer, strongly focuses on regulatory compliance, offering detailed disclosures and regular audits of its reserves.

While Circle has built trust through transparency and regulation adherence, Tether faces criticism for its less clear reserve reporting and perceived lack of regulatory compliance, creating a sharp contrast between the two stablecoins regarding public trust and transparency.

USDT vs. USDC: Practical Uses

Winner: Tie

Since both digital assets are stablecoins, we can’t discuss their practical uses too much because their uses are pretty similar, with no big differences that stand out and are relevant to mention. 

They’re both designed to provide a stable digital alternative to the US dollar and here’s how people commonly can use them:

  1. Trading on Crypto Exchanges – USDC and USDT are popular trading choices because they stay stable, unlike other cryptocurrencies. Traders use them to quickly move between different coins without converting back to regular, fiat money.
  2. Sending Money Across Borders – These stablecoins make it easy to send money internationally. They’re faster and cheaper than traditional bank transfers, especially for people in places where banking isn’t easily accessible.
  3. Earning Interest in DeFi – Both USDC and USDT are used in decentralized finance (DeFi). You can lend them out or use them as collateral to get loans, all while earning interest on your holdings.
  4. Protecting Against Price Swings – Crypto prices can swing wildly, but USDC and USDT hold their value as they’re pegged 1:1 to the US dollar, meaning their value is designed to stay stable and equal to one dollar. People often move their money into these stablecoins to avoid losses when the market shatters.
  5. Making Cheap and Fast Payments – Whether for remittances or just paying someone, USDC and USDT are great for fast, low-cost transactions compared to traditional banking services.

Short and Long-Term Perspectives

Winner: USD Coin (USDC)

USDT and USDC are both stablecoins, which means they are designed to keep their value at $1, avoiding the wild price swings seen with other cryptocurrencies. Since they are pegged to the US dollar, predicting their price isn’t relevant. However, some key factors could impact the future of these stablecoins in both the short and long term.

Related to short term, USDT is the most commonly used stablecoin and is expected to continue to be, thanks to being one of the first on the scene and having widespread use across trading platforms and DeFi projects.

Despite its popularity, USDT has faced questions about whether it has enough reserves to back every token it issues. This lack of clarity can make people nervous, especially when there’s news about regulation or market uncertainty.

So, in the short term, any negative headlines or actions by regulators could push users to look for more transparent options, which could hurt USDT’s position and, at the same time, boost other stablecoins like USDC.

USDC is known for being more transparent and closely following regulatory rules. It’s managed by Circle and Coinbase, which regularly release reports showing that USDC is fully backed by reserves. This makes USDC a safer bet for institutions and businesses that want more reassurance.

USDC will likely keep growing in the short term, especially as governments set clearer rules for cryptocurrencies. Its presence on multiple blockchains and its use in DeFi make it a strong contender for wider adoption.

In the long run, USDT could face serious challenges if it doesn’t improve transparency and keep up with regulations. People’s trust in it could weaken if doubts about its reserves continue, and tighter regulations might make it harder for USDT to operate.

There’s also the risk of losing ground to other stablecoins or digital currencies issued by central banks (CBDCs). If USDT doesn’t adapt, it might struggle to stay relevant.

USDC looks more promising in the long term because it’s already focused on following the rules and being clear about its reserves. This makes it appealing to big institutions and financial systems that are cautious about risk.

However, USDC’s future success will depend on how well it adapts to new technologies and trends, like DeFi and the metaverse. These areas offer great opportunities but also come with risks. USDC will need to keep innovating to stay ahead.

Disclaimer. This analysis is for informational purposes only and does not constitute financial advice. Cryptocurrency investments carry significant risks due to high volatility. Always perform thorough research or consult a financial advisor before investing.  

Where Are They Heading?

Tether (USDT), the dominant stablecoin, faces a complex future. Ongoing scrutiny surrounding its reserves and transparency poses a significant challenge.

Moreover, and maybe the most viral news about this subject in the last period is the one that presents a potential removal from European exchanges for Tether due to its apparent non-compliance with the Markets in Crypto-Assets (MiCA) regulations. Its compliance deadline was December 30, 2024.

While no regulators have explicitly stated USDT’s non-compliance, concerns exist regarding its audit practices and the recent halt in new coin minting.

Criticism of Tether’s audit practices has resurfaced, with some questioning the reliance on assurance reports from BDO Italia instead of audits from major firms. Tether’s CEO, Paolo Ardoino, has defended the company’s approach, emphasizing its focus on practical use cases for USDT and Bitcoin.

Coinbase has already informed users that it may delist USDT if it does not comply with MiCA regulations. This action aligns with MiCA’s e-money authorization requirements, which mandate that stablecoin issuers obtain regulatory approval in at least one EU member state. Coinbase has advised users to consider alternatives like USD Coin (USDC), which meets MiCA standards.

USDC, with its focus on transparency and regulatory compliance, is well-positioned for institutional adoption.

But even USDC had some problems. A recent example occurred about the collapse of Silicon Valley Bank (SVB). USDC briefly dipped to $0.88 after news broke that Circle, the company issuing USDC, had $3.3 billion in reserves tied up at the failing bank. This raised concerns about the availability of these reserves to back USDC, leading to a temporary loss of confidence in the stablecoin’s peg.

However, the de-peg for USDC was not as severe as the one experienced by UST earlier in 2024. Unlike UST, which is an algorithmic stablecoin, USDC is backed by reserves of assets like cash and short-term treasury bills.

In the case of USDC and the SVB collapse, Circle assured users that 100% of deposits from SVB would be available, and USDC quickly recovered its peg to $1. While this event highlighted the potential risks associated with stablecoins, it also demonstrated USDC’s resilience compared to other stablecoins like UST.

Besides these, remember that USDT and USDC face competition from emerging stablecoin technologies. The rise of algorithmic stablecoins and the potential impact of central bank digital currencies (CBDCs) could disrupt their market dominance.

FAQ

Is USDC Better than USDT?

USDC is often considered safer because it is fully backed by reserves and operates under stricter regulatory guidelines, while USDT has faced criticism for limited transparency and less regulatory oversight.

Is USDC Safer than USDT?

Yes, USDC is generally considered safer since it is fully backed by reserves and follows regulatory standards, whereas USDT is only partially backed and has less regulatory scrutiny.

Can You Lose Money with USDC or USDT?

Yes, there’s a risk of losing money with USDC or USDT if market confidence drops, causing the stablecoin’s value to fall below $1.

What is the Difference Between USD and USDT?

USD is the physical, fiat currency issued and backed by the US government. USDT is a digital stablecoin pegged to USD and backed by underlying fiat currencies or other assets Tether Limited holds.

The key difference is that USD is physical money, while USDT is a digital asset backed by reserves to maintain a stable value.

How are Stablecoins Taxed?

Stablecoins are taxed similarly to other cryptocurrencies. Any time you trade, sell, or use stablecoins for purchases, it is considered a taxable event. If you receive stablecoins as income, they are subject to income tax. You must report these activities on your tax return, even though capital gains on stablecoins are often minimal due to their stable value. Stablecoin transactions over $10,000 will be reported to the IRS starting in 2025. Transferring between wallets is not taxable, but earning interest on stablecoins is treated as ordinary income.

Final Thoughts

So, the choice between USDC and USDT depends on your priorities.

USDT is popular due to its huge market presence, liquidity, and widespread use. If you need a stablecoin for fast trades or high liquidity, USDT is a solid option. However, its transparency has been questioned, especially regarding its underlying fiat currency reserves, leading to regulatory concerns.

On the other hand, USDC is known for its transparency and strict regulatory compliance. Regular audits back it and have a clearer picture of its underlying fiat currency reserves. This makes USDC safer for users who value trust, especially in regulated markets like Europe.

If you’re looking for quick trades and liquidity, USDT is a great choice. But if you want a stablecoin with stronger transparency and compliance, USDC might be better for you in the long run. It all comes down to whether you prioritize liquidity or trust and transparency in your stablecoin.

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