USDC vs. USDT: Comparing Stablecoins

While cryptocurrencies like BTC and ETH are volatile, stablecoins are pegged to the US dollar — making them a great choice for users interested in making transactions in crypto! 

Two of the most popular stablecoins on the market are USDC and USDT. In this article, we'll explore the differences between USDC and USDT, their pros and cons, and how they fit into the broader crypto ecosystem.

What is USDT (Tether)?

Tether (USDT) is a stablecoin that was launched in 2014. It is pegged to the US dollar and backed by a reserve of fiat currency and other assets.

USDT has faced its share of controversies. In 2021, Tether was fined $41 million after regulators found that the company had misled users about having reserves for all of its assets. 

Despite this, USDT is still the most popular stablecoin in the world partially due to the fact that it was one of the first stablecoins ever launched. At the time of writing, USDT is the largest stablecoin by market capitalization and is supported by many DeFi protocols. 

What is USDC (USD Coin)?

USD Coin (USDC) is a newer stablecoin, launched in 2018 by Circle. The stablecoin is managed by the Centre consortium, which includes Circle and Coinbase.

USDC is known for its transparency and regulatory compliance, providing monthly audits of its reserve assets. 

Tether vs. USDC

Let’s walk through how Tether and USDC compare on different factors. 

Adoption 

Winner: USDT 

Tether was launched in 2014, while Circle was launched in 2018. That means Tether has better adoption — as USDT had several more years to attract users. 

Reserve assets & transparency 

Winner: USDC 

In the past, Tether was fined for misleading users about its reserves. While Tether claimed to have ‘100% reserves at all times’, an investigation found that Tether only held 27.6% of the value of its stablecoin in reserves. 

While Circle has faced issues such as the Silicon Valley Bank crisis, the company publishes monthly third-party assurances of its reserves.

Regulatory compliance 

Winner: USDC 

All of Circle’s reserves are held with regulated financial institutions. This helps ensure that USDC is compliant with the latest financial regulations. 

On Tether’s site, the company says that it follows ‘world-class standardized compliance measures’. However, there is a lack of transparency into what these measures entail.

Price 

Winner: Tie 

Both USDC and USDT are pegged to the price of the US dollar. 

Which is Better: USDC or USDT?

Summary: While USDT is significantly more popular, USDC is a better option due to its regulatory compliance and transparency. 

The choice between USDT and USDC depends on individual preferences and requirements. USDT is more widely used, while USDC is considered more trustworthy due to its regulatory compliance and transparency.

USDC: Better transparence and regulatory compliance 

USDT: Higher adoption 

The Downside of USDC

USDC is backed by reserves held by regulated financial institutions. While this structure helps protect USDC against a potential collapse, it also holds associated risks. 

In 2023, USDC briefly lost its peg with the US dollar after the collapse of Silicon Valley Bank — a financial institution that held 8% of USDC’s reserves. 

Is USDC Safe?

USDC is generally considered safer than USDT due to its transparency and regulatory compliance. Regular audits and real-time reports on reserves provide assurance of its backing by actual assets.

Why is USDC Dropping?

Between 2022-2023, USDC market capitalization declined by almost 50%. 

It’s important to note that the price of one unit of USDC is still pegged to the U.S. dollar. The decline in USDC’s market cap simply shows that the stablecoin’s supply has fallen as cryptocurrency investors turn to alternatives like USDT. 

It’s likely that this drop can be partially attributed to investors losing trust in USDC after the de-pegging caused by the collapse of Silicon Valley Bank.

Can I Transfer USDC and USDT to My Bank Account?

At this time, most American banks do not support stablecoins. In most cases, you’ll need to convert your USDC and USDT to USD to transfer it to your bank account. 

Where can I buy USDC and USDT? 

You can buy USDC and USDT after starting an account with a centralized exchange. Coinbase, Kraken, and Gemini are great options to buy stablecoins like USDC and USDT. 

How are Stablecoins Taxed?

Despite the fact that stablecoins like USDC and USDT are pegged to the US dollar and are designed to be used in transactions, they are subject to capital gains tax upon disposal (though it’s likely that your capital gain will be close to 0). 

For more information, check out our complete guide to stablecoin taxes. 

In conclusion

While both USDT and USDC are popular options, the right stablecoin for you may vary based on what you’re looking for. While USDT is the most popular stablecoin in the world, USDC may be a better choice for users who value transparency and regulatory compliance.