Key takeaways
- USDt and USDC are stablecoins pegged to the US dollar for stability in crypto markets.
- USDC is transparent and compliant, while USDt leads in liquidity.
- USDt is widely used for trading; USDC excels in DeFi and institutional use.
- USDC complies with EU regulations; USDt’s future in Europe is uncertain.
USD is a well-known crypto ticker prefix, often indicating a cryptocurrency’s price relationship with the US dollar. Such cryptocurrencies are called stablecoins, designed to maintain a stable value, typically pegged to a fiat currency like the US dollar. They bridge the gap between volatile digital assets and traditional financial systems, offering stability for trading, remittances and storing value.
Tether’s USDt (USDT) and USD Coin (USDC) are two widely used stablecoins, aiming to maintain a 1:1 peg with the US dollar.
But with multiple options available, how do you choose?
This article breaks down the key differences, similarities, and pros and cons of these two dominant stablecoins.
Understanding USDt and USDC
Tether’s USDt (USDT)
Launched in 2014 by Tether Limited, USDt was the first stablecoin to gain traction. It’s designed to maintain a 1:1 peg with the US dollar, offering crypto users a dollar-equivalent asset for seamless trading. Its market capitalization, as of Jan. 6, 2025, exceeds $137 billion, making it the largest stablecoin globally.
USD Coin (USDC)
USDC entered the scene in 2018, co-created by Circle and Coinbase (the Centre Consortium). However, Circle now has full governance over USDC, following the dissolution of the Centre Consortium in 2023.
With a focus on compliance and transparency (to address the shortcomings of USDt), USDC is fully backed by cash and short-term US government bonds, ensuring each token is always redeemable for $1. USDC holds the second spot, with a market cap of approximately $43.9 billion as of Jan. 6, 2025.
Key similarities between USDt and USDC
So, what are the similarities between these two stablecoins?
Let’s find out.
- A “sort-of” digital US dollar: Both USDt and USDC are designed to maintain a 1:1 value with the US dollar. This peg ensures their price remains stable, making them a safe haven for users navigating crypto’s famously volatile market.
- Stability in a volatile market: By staying tied to the dollar, these stablecoins act as a buffer against unpredictable price swings in other cryptocurrencies. Whether markets are soaring or crashing, USDt and USDC hold steady, giving users a reliable alternative.
- Widely used for trading, remittances and store of value: Traders rely on them to quickly move funds without worrying about value fluctuations. They’re also popular for sending money across borders, offering a faster and often cheaper option than traditional systems. For those wanting to secure their gains, both serve as a trustworthy store of value.
- Compatible with multiple blockchains: USDt and USDC operate on networks like Ethereum, Solana and Algorand, allowing users to choose platforms that best match their needs. Some might prioritize Ethereum’s security, while others prefer Solana or Tron for their lower fees and faster transactions.
- Integration with DeFi platforms: These stablecoins are important for decentralized finance (DeFi). From lending and borrowing to staking and yield farming, they play a key role in enabling interactions across DeFi services.
Now, let’s explore the differences.
Key differences between USDt and USDC
The key differences between USDt and USDC are explained in the table below:
Transparency and reserve backing
The biggest difference between USDt and USDC lies in how they approach transparency and reserve backing.
- USDt: Tether has often been criticized for its lack of transparency about what backs its tokens. While the company provides attestations of its reserves, these are not full, independent audits.
According to disclosures, Tether’s reserves include over $100 billion in US Treasury bonds, along with 82,000 Bitcoin (BTC) valued at $5.5 billion, and 48 metric tons of gold. This mix of assets has drawn scrutiny, with critics questioning whether Tether holds enough liquid assets to fully back the billions of USDt in circulation.
- USDC: In contrast, USDC has built its reputation on transparency and regulatory compliance. Circle and Coinbase ensure USDC is fully backed by reserves consisting of cash and short-term US Treasury bonds, with 80% held in Treasurys and 20% in cash deposits within US banks.
These reserves are regularly verified through third-party attestations by a Big Four accounting firm, following American Institute of Certified Public Accountants (AICPA) attestation standards. This transparent approach has made USDC particularly attractive to institutions and platforms requiring strict accountability and verifiable backing.
However, USDC’s lower liquidity compared to USDt has caused some challenges. For instance, in March 2024, USDC momentarily traded as low as $0.74 on Binance during a marketwide sell-off triggered by doubts over a spot Bitcoin exchange-traded fund (ETF) approval. This depeg occurred due to insufficient liquidity in the USDC/USDt trading pair when large sell orders overwhelmed the market.
Did you know? Reserve backing is very important. It builds trust by guaranteeing tokens can be redeemed for fiat, providing stability in volatile markets. Transparent reserves also meet regulatory standards and ensure liquidity, enabling issuers to handle large redemptions without losing value.
Blockchain compatibility and use cases
Where can you use USDt?
It might come as a surprise, but USDt was initially launched on the Bitcoin blockchain via the Omni Layer. Over time, it expanded to other blockchains to meet growing user demands. Today, USDt is available on networks such as Ethereum, Tron, Solana, Avalanche and Polkadot, among others.
This wide range of compatibility allows users to choose networks based on factors like speed, transaction costs and integration with specific decentralized applications (DApps).
Use cases for USDt:
- Trading pairs: USDt dominates as a base trading pair on major exchanges like Binance and Huobi, enabling seamless swaps between cryptocurrencies.
- Cross-border payments: On blockchains like Tron, USDt is used for fast and cost-effective international transfers, especially in regions with limited banking access.
- Hedging against volatility: Traders often park funds in USDt during market downturns to shield their portfolios from crypto price swings.
Where can you use USDC?
USDC started its journey on the Ethereum blockchain as an ERC-20 token, aligning with its focus on transparency and DeFi integration. As its adoption grew, USDC expanded to other blockchains, including Solana, Algorand, Stellar, Polkadot, Near, Sui and Arbitrum. Its integration with newer, faster chains like Solana and Algorand is, no doubt, a nod to scalability and cost-efficiency.
Use cases for USDC:
- DeFi applications: USDC is a cornerstone in lending platforms like Aave and Compound, where users can earn interest or take loans using their holdings.
- Institutional transactions: Businesses, especially in the US, leverage USDC for compliant settlements and payrolls in crypto.
- Stable yield farming: On newer blockchains like Solana, USDC is paired in liquidity pools, providing stable returns for yield farmers without exposing them to volatile assets.
Did you know? Transferring USDt on Ethereum (ERC-20) can cost anywhere from $1.50 to $30, depending on network congestion. On the other hand, sending USDt on Tron (TRC-20) is far cheaper, typically costing just $0.31 to $1. This makes Tron a go-to choice for budget-conscious users and frequent transactions.
USDt vs. USDC: Which stablecoin is MiCA compliant?
The European Union’s Markets in Crypto-Assets (MiCA) regulation sets strict requirements for stablecoin issuers, emphasizing transparency, sufficient reserves and regulatory authorization. This framework has significant implications for major stablecoins like USDt and USDC.
USDt regulatory compliance
Tether’s USDt has long faced scrutiny over its lack of transparency and regulatory challenges. As MiCA takes effect, questions remain about USDt’s compliance with the new standards.
Tether has yet to secure the required authorization to operate under MiCA, leaving its future in the EU uncertain. Some exchanges have already acted preemptively; Coinbase delisted USDt for European users, citing concerns over its ability to meet MiCA’s requirements.
USDC regulatory compliance
On the other hand, USDC has positioned itself as a model of regulatory compliance. Circle, the issuer of USDC, has proactively aligned its operations with MiCA, obtaining authorization to issue USDC as a compliant e-money token. This move has solidified USDC’s status as the first major stablecoin to adhere to MiCA regulations.
As a result, USDC will continue to be available on major platforms within the EU, maintaining its utility for users who prioritize transparency and compliance.
Did you know? It’s not all doom and gloom for USDt. In 2024, Tether began releasing quarterly attestation reports detailing its financial status. Since then, it has become apparent that a significant portion of its reserves are held in US Treasurys.
How to choose between USDt and USDC
Both coins have their pros and cons, as you’ve explored in this article.
USDt, with its liquidity and global reach, is an ideal choice for traders and crypto enthusiasts seeking efficiency and broad exchange support. Its strong market presence and resistance to depegging make it a reliable tool for navigating the often unpredictable world of cryptocurrency trading.
However, it falters in areas like transparency, with limited reserve audits, faces ongoing scrutiny over its reserve backing, and carries the risk of delistings in regions with stricter regulations like the EU.
Then, there’s USDC, shining as the stablecoin of choice for those prioritizing regulatory compliance and transparency. Its adherence to MiCA regulations and consistent reserve attestations make it particularly attractive to institutions and users participating in DeFi applications or seeking a secure store of value.
However, occasional liquidity challenges, such as its brief depegging incidents, definitely highlight areas for improvement.
So, as of January 2025:
- Choose USDC if: You value regulatory compliance and verifiable reserve transparency and are planning to use the stablecoin in regulated or institutional contexts, such as DeFi lending platforms or institutional payment systems.
- Choose USDt if: You’re a trader or crypto enthusiast needing high liquidity, global exchange support and cost-effective transfers, especially on networks like Tron.
But let’s be honest — you don’t have to choose one or the other. There’s nothing wrong with using both, as long as you stay compliant with local regulations — and that’s what most users do!
Written by Bradley Peak