USDT vs. USDC: Which Stablecoin Should You Use?

USDT vs. USDC: Key Differences

Stablecoins have been around for nearly a decade.

They have brought some stability to the volatile crypto market and become an alternate way to send money across countries, especially within Africa, without the stress of dealing with traditional payment methods.

Tether (USDT) and USD Coin (USDC) are two of the most popular stablecoins in the cryptocurrency market. This article explains their differences and helps you understand which might be better for your trading needs.

What is a Stablecoin?

A Stablecoin is a type of cryptocurrency that is tied to an asset like money or gold so that it doesn't fluctuate in value as much as other cryptos like BTC, ETH, PEPE, DOGE, XRP, etc. This helps to keep it predictable and stable since it's pegged(tied) to the same value of a generally stable fiat currency like the U.S. Dollar or a commodity like gold.

Types of Stablecoins

There are different types of Stablecoins based on the type of collateral used to back them, and the following are the most common:

• Fiat-backed Stablecoins

For fiat-backed Stablecoins, the creator or organisation managing it will set up a reserve where a particular amount of the asset collateral for the Stablecoin is stored.

In traditional banking and finance, reserves are funds businesses, banks, or governments set aside to be ready for unexpected expenses or losses. They are like a savings account that provides financial stability during challenging times.

In the context of crypto stablecoins, reserves mean that for each Stablecoin a trader has, an equal dollar is backing it in those reserves. Basically, for each fiat-backed Stablecoin like USDT and USDC in a wallet, there is 1 dollar in reserve.

Independent trustees and auditors maintain these reserves and frequently check them to ensure they follow legal and financial regulations.

USDT and USDC are commonly traded fiat-backed Stablecoins. Their value is equivalent to 1 U.S. dollar; this means 1 USDT ≈$1 and 1 USDC ≈$1.

• Commodity-backed Stablecoins

These are Stablecoins backed by commodities like real estate or precious metals like gold or silver to help them maintain their value. An example of a Stablecoin backed by gold is Digix.

• Crypto-backed Stablecoins

These Stablecoins are backed by other cryptocurrencies. Since the cryptocurrency used as a reserve is typically volatile, crypto-backed Stablecoins are typically over-collateralised. This means that a larger amount of cryptocurrency tokens are stored in reserve for distributing a smaller amount of these Stablecoins. An example of a popular crypto-backed Stablecoin is DAI. It runs on the Ethereum blockchain, and its value is pegged to the U.S. dollar.

• Algorithmic Stablecoins

These Stablecoins use a computer algorithm to stabilise their value. For instance, if the price of an algorithmic Stablecoin is tied to $1, but the Stablecoin increases in price, the algorithm automatically issues more tokens into the supply chain to lower the price. Similarly, if the price falls below $1, the algorithm will reduce the supply to raise the price back up. An example is Frax.

USDC vs. USDT: Let's Compare Both Stablecoins

What is USDT (Tether)?

Tether (USDT), launched in 2014, is one of the earliest and most widely used stablecoins, pegged 1:1 to the US dollar.

It is issued by Tether Limited and is backed by a reserve of assets, including fiat currency, cash equivalents, and other holdings.

Key Features of USDT

• Early Mover Advantage: As one of the first stablecoins, USDT gained widespread adoption in crypto trading and decentralised finance (DeFi).
• Multi-Chain Availability: Initially issued on the Omni Layer (a Bitcoin protocol), USDT has since expanded to Ethereum, Tron, Solana, Avalanche, and other blockchains.
• Market Dominance: Despite controversies, USDT remains the largest stablecoin by market capitalisation and is supported by most exchanges and DeFi platforms.

Controversies and Regulatory Scrutiny

Tether has faced criticism over its reserve transparency:

• In 2021, the US Commodity Futures Trading Commission (CFTC) fined Tether $41 million for misrepresenting its reserves.
• Questions persist about whether USDT is fully backed by liquid assets, though Tether publishes periodic reserve reports.

Despite these concerns, USDT continues to dominate due to its liquidity and deep integration across crypto markets.

What is USDC (USD Coin)?

USD Coin (USDC), launched in 2018 by Circle in collaboration with Coinbase through the Centre consortium, is a regulated and transparent stablecoin. It is fully backed by cash and short-term US Treasury bonds, with regular attestations from independent auditors.

Key Features of USDC

• Regulatory Compliance: USDC adheres to strict financial regulations, making it a preferred choice for institutional investors.
• Transparency: Circle provides monthly reserve attestations, ensuring full backing of USDC in circulation.
• Multi-Chain Support: Initially launched on Ethereum, USDC is now available on Algorand, Solana, Stellar, Avalanche, and other networks.
• Growing Adoption: While smaller than USDT in market cap, USDC is widely used in DeFi, institutional trading, and cross-border payments.

USDT vs. USDC: A Comprehensive Stablecoin Comparison

While both Tether (USDT) and USD Coin (USDC)  are pegged 1:1 to the US dollar, they differ significantly in adoption, transparency, regulatory compliance, and usability.

Below is a detailed comparison of these two leading stablecoins.

1. Adoption & Market Dominance

USDT (Tether)

• Launched in 2014, making it one of the oldest and most widely adopted stablecoins.
• Dominates trading volumes across major exchanges (Binance, OKX, Bybit, etc.).
• Highest market cap among stablecoins (~$144 billion as of April 2025.
• Preferred in speculative trading due to deep liquidity and availability on multiple blockchains (Ethereum, Tron, Solana, etc.).

USDC (USD Coin)

• Launched in 2018 by Circle and Coinbase.
• Second-largest stablecoin by market cap (~$60 billion as of April 2025).
• Widely used in DeFi and institutional finance due to regulatory compliance.
• Growing adoption in traditional finance, including Visa and cross-border payments.

🏆Winner: USDT (due to first-mover advantage and higher liquidity)

2. Reserve Assets & Transparency

USDT (Tether)

• Faced multiple controversies over reserve backing.
• In 2021, fined $41 million by the CFTC for falsely claiming full USD backing.
• Reserves include cash, commercial paper, loans, and other assets (exact composition not always clear).
• Quarterly attestations (not full audits) provided by accounting firms.

USDC (USD Coin)

• Fully backed by cash and short-term US Treasuries, with monthly attestations by top auditors (e.g., Grant Thornton).
• Greater transparency—Circle publishes detailed reserve breakdowns.
• Regulated financial institutions hold reserves, reducing counterparty risk.

🏆Winner: USDC (more reliable and transparent)

3. Regulatory Compliance

USDT (Tether)

• Operates with less regulatory oversight compared to USDC.
• Faced bans in some jurisdictions (e.g., New York due to BitLicense issues).
• Claims compliance but lacks full transparency in audits.
• Tether is audited by BDO Italia and provides quarterly reports on its platform functionality and the state of its reserves used to back its USDT stablecoin.

USDC (USD Coin)

• Issued by Circle, a licensed financial company, ensuring strict compliance.
• Circle is audited by Grant Thornton LLP and provides monthly reports on their transparency page on the performance of their USDC stablecoin.
• Follows US money transmission laws and works with regulators.
• Preferred by institutions due to its compliance-first approach.

🏆Winner: USDC (more compliant and trusted by regulators)

4. Price Stability & De-Pegging Incidents

• Both USDT and USDC aim to maintain a 1:1 peg to the USD.
• USDT has de-pegged multiple times, dropping to $0.95 during market panics (e.g., 2018, 2022).
• USDC briefly fell to $0.88 during the 2023 Silicon Valley Bank collapse but recovered quickly due to government intervention.

🏆Winner: Tie (both have faced de-pegging but regained stability)

5. Redemptions & User Accessibility

USDT (Tether)

• Minimum redemption: 100,000 USDT (~$100,000) for direct conversions.
• High fees and KYC requirements, making it less accessible for retail users.

USDC (USD Coin)

• No minimum redemption for institutional users; as low as $100 for retail.
• Faster and cheaper conversions via Circle’s platform.

🏆Winner: USDC (more user-friendly and accessible)

6. Longevity & Track Record

• USDT has been operational since 2014, surviving multiple crypto crashes.
• USDC, launched in 2018, is newer but has gained trust rapidly.

🏆Winner: USDT (longer operational history)

7. Safety & Transparency

• USDT has faced criticism for opaque reserves and legal issues.
• USDC provides regular audits and is considered safer for long-term holdings.

🏆Winner: USDC (better transparency and risk management)

Final Verdict: Which Stablecoin Should You Use?

Choosing between USDT and USDC depends on what you want at the time, especially as they are both ≈ 1:1 with the US Dollar and run on nearly the same blockchains.

A key difference, however, is their transaction cost.

USDC tends to be cheaper to transfer than USDT. Conversely, USDT is more popular among traders and businesses that accept cryptocurrency.

Which is Better: USDC or USDT?

To help your decision, here is a table detailing their features:

💡Extra Information For Your Trades

When to Use USDT:

✔ High-frequency trading (better liquidity on exchanges)
✔ Tron & Solana-based transactions (wider availability)

When to Use USDC:

✔ Long-term holdings (safer reserves)
✔ Institutional & DeFi use (regulatory-friendly)
✔ Cross-border payments (trusted by traditional finance)

FAQs

Disclaimer: This article was written to provide guidance and understanding. It is not an exhaustive article and should not be taken as financial advice. Obiex will not be held liable for your investment decisions.