Digital finance’s bright spots include stablecoins like USDT and USDC. its 1:1 peg to the US dollar accounts for its stability. As a result, their acceptability and use in daily transactions are growing rapidly on a global scale. For instance, in the second quarter of this year, the stablecoin payment value in Singapore hit $1 billion.
One question, though, has some people perplexed: USDT or USDC? Although they appear to be extremely equal and have the same goal, they are actually very different. So let’s get started.
USDT and USDC: What Are the Key Differences?
I think USDC is unique in terms of transparency. It is known for taking meticulous steps to preserve its quality. Monthly attestation reports from independent accounting firms are provided by Circle, the USDC issuer. Both user confidence and regulatory approval are bolstered by this. In contrast, despite the lack of evidence to back up such claims, Tether’s transparency policies, as the issuer of USDT, have been a source of debate. In an effort to increase transparency, Tether now provides quarterly reports and claims that each USDT token, like USDC, is backed by reserves equal to its supply.
In my opinion, USDC is once again “winning” in terms of regulatory compliance, particularly for banks and traditional financial systems. Circle adheres to stringent Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations and keeps its reserves with US financial institutions that are subject to regulation. Regulating Tether has, regrettably, become more difficult. Again, even though they made compliance enhancements, some still don’t think Tether’s regulatory approach is particularly clear. However, as was previously said, there isn’t any concrete proof that they have broken any AML rules. Furthermore, they have already vehemently refuted these accusations, and most all, they have a solid track record of collaborating with law enforcement.
Nonetheless, USDT has a significant edge because to its widespread use and strong liquidity. Since its inception in 2014, USDT has become a fundamental part of the cryptocurrency ecosystem. Due to its availability on nearly all exchanges and regular usage in trading pairs, USDT is exceptionally liquid and accessible to the majority of traders. Because of these qualities, it is the most traded stablecoin in terms of volume. It’s interesting to note that its broad acceptance is closely linked to USDC’s decision to leave TRON, which is generally thought to be tied to AML concerns. As a result, consumers of USDC who were looking for inexpensive transactions switched to USDT on TRON. Because of USDC’s conservative approach to networks that they deem hazardous, TONNE has chosen to collaborate with USDT instead, which has resulted in USDC’s adoption and market share growth being somewhat slower.
The blockchain network that the stablecoins are utilised on determines the transaction costs. Solana and Algorand are the quickest and most economical. Algorand guarantees safe and quick processing with costs as low as 0.001 ALGO ($0.0001), while Solana’s algorithm offers high-speed transactions of 1,504 per second with incredibly low fees of 0.000014 SOL ($0.00189).
The Increasing Popularity of Stablecoins
Tighter banking laws have contributed to the rise in popularity of stablecoins, especially USDT and USDC. Under Basel II and III, traditional banks increased compliance requirements, which led some businesses to turn to stablecoins as an option for lower risk and more efficient transactions. According to studies from only last year, USDT transactions surpassed those of conventional payment giants like Visa and Mastercard in terms of both volume and count. Because of this, major businesses—Visa in particular—turned to cryptocurrency and integrated stablecoins.
This highlights an important realisation: although Tether and Circle issue centralised stablecoins, they operate on top of decentralised networks, fusing blockchain’s natural efficiency with regulatory compliance. As a result, USDT and USDC are stable but have a centralised control risk. I think that’s really significant, but not many people get it.
The sector is already being impacted by the recent Basel IV debates. The capitalisation of USDT and USDC was around $120 billion and $34 billion, respectively. Notably, US Treasury notes account for almost 80% of USDT’s reserves. Because interest rates are rising—they were 6–7% last year, for instance—it produces substantial profits. USDT received $5.5 billion in interest on these assets in 2023 alone. It draws attention to how stablecoin assets affect cryptocurrency’s bottom line. However, because Tether owns such a large percentage of US assets, this arrangement also includes some US supervision.
Choose based on your needs
Both USDT and USDC serve distinct user needs and are essential components of the cryptocurrency ecosystem. Which should I pick? The solution is entirely dependent on the objectives of each user. Traders may choose USDT if they want smooth market access and cross-blockchain flexibility. USDC is perhaps a better choice for those that value security, compliance, and solid support.
A vital component of the financial industry, stablecoins are only going to gain more traction. They are accessible to all types of consumers since they provide the advantages of both cryptocurrency and TradFi.
