USD Coin (USDC) vs. Tether (USDT)

US dollar-backed stablecoins USD Coin (USDC) and Tether (USDT) are the two most widely used stablecoins in the world.

We compare USDC versus USDT on key stats like market capitalization, track record and transparency to help you decide on what’s best for your financial goals.

USDC vs. USDT at a glance

History of USDT and USDC

Originally called Realcoin, Tether (USDT) was brought to market in July 2014. USDT quickly became used as an alternative to US dollars on crypto exchanges.

Other stablecoins were created in 2014 and 2015, but USDT is the only one from that era that has survived. It’s since become the most widely used stablecoin in the world and the #3 ranked crypto by market cap, according to CoinGecko.

It was created by the Goldman Sachs-backed payment company Circle and is managed by the Centre consortium, which is comprised of Circle and major crypto exchange Coinbase.

In under four years, USDC’s market cap has grown to $56 billion. This makes it the second-most widely used stablecoin in the world and the #4 ranked crypto by market cap according to CoinGecko.

USDC vs. USDT: An issue of trust

USDC has earned a good reputation in the crypto space because its parent company, Circle, is more transparent about the assets that back USDC than Tether is with USDT.

USDC’s transparency

USDC was created to provide the crypto market with a US dollar-backed stablecoin like USDT but with more transparent backing.

Stablecoin users didn’t trust that USDT was fully collateralized because Tether’s reserves had never been audited. In other words, Tether has been less than forward regarding its finances, and Circle believed that the market needed a stablecoin that investors could trust.

USDC’s reserves have been audited annually by outside accounting firms since the asset’s inception, and the audits from 2020 and 2021 are filed with the SEC.

USDC also undergoes monthly attestations or stress tests in which accounting firms attest to the accuracy of Circle’s financial reports on USDC.

Reports show that USDC is backed only by actual US dollars and US Treasury Bills.

This transparency is important not just for USDC users but also because Circle is preparing to become a publicly-traded company listed on the New York Stock Exchange.

USDT’s lack of transparency

Tether has been notorious for not disclosing the assets it holds to collateralize USDT.

Tether has never been audited nor disclosed the names of the banks in which it keeps its reserves.

Only through an attestation on December 31, 2021, did Tether prove that about 44% of its reserves were in US Treasury Bills. And as of May 2021, only 3% of its reserves were in US dollars.

The rest of its reserves are described as holdings of “unspecified commercial paper,” or short-term debt issued by companies. It’s also added that it doesn’t want to disclose the type of commercial paper it holds because it doesn’t want to give away its “secret sauce.”

New York State sued Tether in April 2019, alleging that it attempted to cover up an $850 million loss.

Bitfinex, a crypto exchange owned by the same company that owns Tether — iFinex — was rumored to have lent Tether money to cover up the losses.

In 2019, the New York Supreme Court found that Tether (USDT) was only 74% backed, and New York State has prohibited Tether from doing business within its borders.

Tether settled the lawsuit by paying a fine of $18.5 million.

Tether still has not been audited and has taken part in only one attestation in the past six months.

Tether has also never issued a full report of what assets compose its reserves, nor in which banks or on which platforms these reserves are kept.

Some fear that Tether poses a systemic risk to crypto markets. For example, professors at the University of Texas found in 2018 that USDT tokens had been minted — without necessarily being properly collateralized — to buy Bitcoin as a means to prop up its price.

Is Tether’s lack of transparency really an issue?

Despite the controversy surrounding USDT, Tether has never failed to process a redemption for an actual US dollar.

If there were a run on Tether, however unlikely, it would mean that not everyone holding USDT tokens would be able to redeem them for actual US dollars.

Bottom line

Whether you’re parking your money in USDT or USDC between trades, lending your stablecoins to generate yield or using them as a medium of exchange, make sure you’ve considered each asset’s track record of transparency and accountability first.

FAQs

• Which is better: USDC or USDT?

  Ultimately, it's up to you to determine whether USDC or USDT is better suited to your objectives. To help you decide, browse our overview of up-to-date market data or compare USDC versus USDT's financial backing and how often their reserves are reviewed and disclosed to the public.

• Is USDT the same as USDC?

  Both USDT and USDC are US dollar-backed stablecoins, but there are some key differences. Take a look at our table above to learn more about the reserves that back each of these assets.

• Is USDC cheaper than USDT?

  Most of the time, both stablecoins maintain their 1:1 peg to the US dollar. You can compare the current price of USDC versus USDT in our table.

  In volatile periods in the market, you might see the price of USDC or USDT rise and fall slightly on either side of one US dollar. In rare cases, the coins have fallen 15-25% from their pegs, but the fluctuations have been relatively short-lived.