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USD Coin (USDC) vs. Tether (USDT)
We compare USDC and USDT, the 2 largest stablecoins by market cap
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
|All-time high date||May 08, 2019||July 24, 2018|
|Notable team members||Jeremy Allaire, Sean Neville, Brian Armstrong||Brock Pierce, Craig Sellars, Reeve Collins|
|Partnerships||Visa, Ripio||Tron, OMG Network|
|Network||Ethereum, Binance Smart Chain, Solana and others||Ethereum, Binance Smart Chain, Solana and others|
What are stablecoins and what do people use them for?
Stablecoins are digital tokens that aim to maintain a 1:1 ratio with the value of currencies like the US dollar.
These tokenized dollars can be collateralized — or backed — in many ways. USDT and USDC, the two largest stablecoins by market capitalization, are backed with actual US dollars or other reserve assets like US Treasury bills or commercial bonds.
High-frequency traders often use stablecoins. If traders want to exit a position in an asset like Bitcoin (BTC) but don’t necessarily want to move their money back into a bank account, which often takes days, they can park their money in stablecoins before making their next trade.
Some hold stablecoins to earn a yield on them. Stablecoin holders can earn yields on their stablecoins through centralized finance (CeFi) platforms like BlockFi or through decentralized finance (DeFi) protocols like SushiSwap.
Stablecoins are also used as a currency outside of the United States. People use US dollar-backed stablecoins to pay for goods and services in countries like Argentina, which have dollarized due to high inflation in their national currencies.
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 fees
The fees associated with using USDC and USDT are not related to the tokens themselves. Instead, the fees for using these tokens have to do with the blockchain on which you use them.
For example, transaction fees on the Ethereum blockchain are typically much higher than the transaction fees on other Layer 1 blockchains like Solana, Binance Smart Chain and Fantom or Layer 2 blockchains like Polygon.
What are Layer 1 and Layer 2 blockchains?
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.
|Reserve backing||US dollars, Treasury Bills||US dollars, Treasury Bills, corporate bonds|
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.
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.
Continue your research on USDC versus USDT by reading our market data overviews on each coin: USD Coin (USDC) and Tether (USDT).
- “How to build trust – USDC audits and attestations,” Circle, June 3, 2022 https://www.circle.com/blog/how-to-build-trust-usdc-audits-and-attestations#:~:text=The%20USDC%20reserve%20has%20been
- “Anyone seen Tether’s billions?,” Bloomberg, October 7, 2021
- “Circle CEO: USDC Becoming More Transparent to Meet Accountability Standards,” Yahoo, July 12, 2021
- Consolidated financial statements as of December 21, 2021 and 2020, and for the year ended December 21, 2021 and 2020, SEC, May 6, 2022
- “We like to be perfectly clear,” Centre
- “The Tether controversy, explained,” The Verge, August 16, 2021
- “Tether fails to dispel mystery on stablecoin’s crucial reserves,” Bloomberg, December 3, 2021,
- “Tether has reduced commercial paper backing USDT by 20% since April,” Yahoo, May 19, 2022
- “Tether cut commercial paper reserve by 17% in Q1, accountants say,” CoinDesk, May 19, 2022 https://www.coindesk.com/business/2022/05/19/tether-cut-commercial-paper-reserve-by-17-in-q1/#:~:text=Tether’s%20attestation%20report%20is%20authorized
- “Attorney General James announces court order against “crypto” currency company under investigation for fraud,” New York State Office of the Attorney General, April 25, 2019
- “Attorney General James ends virtual currency trading platform Bitfinex’s illegal activities in New York,” New York State Office of the Attorney General, February 23, 2021
- “NY AG accuses Bitfinex and Tether of covering up $851 million loss in investor funds,” JD Supra, May 8, 2019
- “Tether lawyer admits stablecoin now 74% backed by cash and equivalents,” CoinDesk, April 30, 2019
- “Tether manipulation pushed up Bitcoin’s price, researchers find,” CoinDesk, June 13, 2018
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