USDT vs USDC: Which Stablecoin is Better?
The cryptocurrency market is known for its high volatility, making traditional digital assets like Bitcoin and Ethereum unstable for storing value or making transactions. This is why stablecoins emerged—cryptocurrencies pegged to fiat currencies, commodities, or precious metals. Among them, the most popular are USDT (Tether) and USDC (USD Coin), which provide stability by maintaining a 1:1 ratio with the US dollar. Despite their similarities, they have key differences that are important to consider.
What Are Stablecoins and Why Are They Needed?
Stablecoins solve the main problem of cryptocurrencies—price instability. They allow users to make payments, store assets, and conduct international transfers without sharp fluctuations in value. The most common model is fiat-backed stablecoins, supported by reserves in traditional currencies such as the US dollar.
Due to their stability, stablecoins are widely used in trading, cross-border payments, and even in decentralized finance (DeFi), where they enable users to earn interest on deposits and participate in liquidity pools. Additionally, they help users bypass banking restrictions by allowing transactions without intermediaries and high fees.
Why Are There So Many USD-Pegged Stablecoins?
The US dollar is the world’s leading currency, making it a convenient base for creating stablecoins. USDT, USDC, and other stablecoins allow users to transact in dollars without needing a bank account. This is particularly relevant for international transfers, where they help avoid fees and delays common in traditional banking systems.
What Makes a Stablecoin Reliable?
The reliability of a stablecoin is determined by three key factors:
Reserve Assets – The more transparent and liquid the reserves, the safer the asset.
Transparency – Regular audits and open financial reports increase user trust.
Regulation – Compliance with international regulatory standards reduces risks for investors.
In Europe, the MiCA (Markets in Crypto-Assets) law, effective from 2024, sets strict requirements for stablecoins, requiring licensing and transparent reserves.
USDT: The First and Most Popular Stablecoin
Tether (USDT) was launched in 2014 as the first stablecoin, enabling quick cryptocurrency conversions into a dollar equivalent. Its market capitalization exceeds $111 billion, and its daily trading volume makes it the most liquid stablecoin globally.
Despite its popularity, USDT has faced criticism for a lack of reserve transparency. In 2017, a hack resulted in the theft of $31 million, and later, it was revealed that Tether had issued unsecured loans, leading to an investigation by the New York Attorney General.
As of 2024, USDT is mainly backed by US Treasury bonds, but its reserve structure remains more complex and less transparent than its competitors.
USDC: A More Transparent Alternative
USD Coin (USDC) was created in 2018 by Circle in partnership with Coinbase. The main difference between USDC and USDT is full transparency and compliance with international regulatory standards. The issuer publishes monthly reserve reports and undergoes independent audits.
In 2023, USDC temporarily lost its dollar peg when it was revealed that $3.3 billion of its reserves were held in the bankrupt Silicon Valley Bank. However, the stablecoin recovered within two days, proving its resilience.
Unlike USDT, USDC is fully backed by cash and US Treasury bonds, making it a more reliable asset in the eyes of investors, particularly in regions with strict regulations.
Key Differences Between USDT and USDC
Although both USDT and USDC serve similar functions, they have several key differences:
Transparency – USDC publishes reserve audits, while USDT faces criticism for a lack of reporting.
Regulation – USDC complies with SEC and MiCA standards, whereas USDT remains outside strict regulatory oversight.
Liquidity – USDT has a significantly higher trading volume, making it the preferred choice for traders.
Stability – USDC withstands crises better due to its transparent reserve structure.
The Impact of MiCA Regulations on Stablecoins
From 2024, MiCA regulations in Europe require stablecoin issuers to have licenses and transparent reserves. This could impact USDT, as it does not undergo regular audits and fails to meet strict EU requirements. On the other hand, USDC already complies with these standards, making it a more favorable option for European exchanges.
Which to Choose: USDT or USDC?
The choice between USDT and USDC depends on the user’s goals:
For trading – USDT is better due to its high liquidity.
For storing funds – USDC is safer due to its transparent reserves.
For use in Europe – USDC complies with MiCA regulations, making it the preferred option.
Conclusion
Both stablecoins play a crucial role in the cryptocurrency ecosystem, providing users with stable digital assets pegged to the US dollar. USDT is more popular and liquid, but has transparency issues. USDC, on the other hand, offers a higher level of security, but has a lower trading volume.
Ultimately, the choice depends on investor preferences:
If liquidity is a priority – USDT is the better choice.
If security and regulation are more important – USDC is the best option.