USDT vs. USDC: Differences and Similarities to Know in 2024

Stablecoins are digital currencies designed to maintain a steady value, often pegged to traditional assets like the US dollar. Their primary role in the crypto market is to provide a safe haven for investors, mitigating exposure to the extreme volatility often seen in cryptocurrencies like Bitcoin or Ethereum. This stability makes them an essential tool for trading, remittances, and even earning interest within the crypto ecosystem.

 

At the time of writing, the total market capitalization of stablecoins stands at $173.5 billion, with a 24-hour trading volume of $44.8 billion, according to CoinGecko. Currently, there are 176 different stablecoins available in the crypto market, each serving unique purposes and use cases. Among them, Tether (USDT) and USD Coin (USDC) are the most prominent, ranking among the top 10 digital assets worldwide by market cap.

 

USDT, launched in 2014 by Tether, was the first stablecoin to gain widespread adoption. It is known for its high liquidity and extensive support across various crypto exchanges and trading pairs. USDC, on the other hand, was introduced in 2018 by Circle and Coinbase. It is recognized for its regulatory compliance and transparency, providing monthly audits to assure its 1:1 backing with US dollar reserves. In this guide, we will explore the key differences between USDT and USDC to help you decide which stablecoin is better suited for your crypto portfolio.

 

Stablecoins: relative supply dominance | Source: Glassnode 

 

Tether (USDT) is one of the earliest stablecoins in the crypto market. Launched in 2014, it aims to maintain a 1:1 value with the US dollar. This stability makes USDT a popular choice for traders. It helps you avoid the volatility that other cryptocurrencies experience. As of now, USDT is the largest stablecoin by market cap, with wide support on most crypto exchanges.

 

USDT: market cap and dominance | Source: TradingView 

 

How USDT Works: Issuance and Backing Mechanism

How Tether works | Source: Tether whitepaper 

 

USDT is issued by Tether Limited. The company claims that each USDT token is backed by reserves, including cash, short-term deposits, U.S. Treasuries, and other assets. When you buy USDT, you deposit an equivalent amount of fiat currency (USD) with Tether Limited. The company then issues an equal amount of USDT tokens. If you want to redeem USDT for USD, Tether burns the tokens, removing them from circulation. This process is meant to maintain the 1:1 peg to the US dollar.

 

USDT was first issued on the Bitcoin blockchain using the Omni Layer protocol. Now, it’s available on multiple blockchains, including Ethereum, Tron, and Solana. This multi-chain support makes USDT versatile, allowing you to use it across various platforms.

 

History of Tether (USDT) Stablecoin

Tether Limited launched USDT in 2014 to bridge the gap between crypto and traditional finance. UTether Limited launched USDT in 2014 to bridge the gap between crypto and traditional finance. Its early start and promise of stability in a volatile market quickly gave it a first-mover advantage, making it one of the most widely used stablecoins today. Initially, USDT operated on the Bitcoin blockchain using the OmniLayer protocol but soon expanded to other networks like Ethereum, Tron, and The Open Network (TON). USDT now boasts a market capitalization of $120 billion, making it the largest stablecoin and the third-largest crypto asset overall.

 

However, Tether has faced controversies. In 2021, the Commodity Futures Trading Commission (CFTC) fined the company $41 million for misleading statements about its reserves. Despite these issues, USDT remains popular due to its high liquidity and broad acceptance across exchanges. USDT’s large market cap and higher multi-chain availability also makes it the most popular crypto used in the DeFi market, along with Wrapped Bitcoin (WBTC).

 

Tether’s Efforts to Improve Transparency, Diversify Holdings, and Combat Inflation

Tether has taken steps to improve transparency, providing quarterly reports detailing its reserve assets. In 2023, it increased its holdings of short-term U.S. treasury bills to strengthen USDT's backing and boost investor confidence. The company has also expanded USDT's reach by integrating with blockchains like Avalanche and Polkadot, offering more options for fast, cost-effective transactions. USDT’s market value approached $120 billion in September 2024, while Tether’s holdings included over $97 billion in U.S. Treasuries and repurchase agreements by Q2 2024. 

 

To mark its 10th anniversary, Tether announced a documentary highlighting USDT's impact on combating inflation. The film features interviews with users in countries like Turkey, Brazil, and Argentina, where inflation is high. Tether's CEO, Paolo Ardoino, emphasized the company's commitment to financial inclusion, especially for people "left behind" by traditional banking systems. In 2023, USDT accounted for 80% of all crypto transactions in Brazil, illustrating its growing role in global finance.

 

Pros and Cons of Using USDT

Pros:

• High Liquidity: USDT has the highest trading volume among stablecoins. Its daily volume often exceeds $44.8 billion, making it easy to trade whenever you need.

• Multi-Chain Support: You can use USDT on several blockchains, including Ethereum, Tron, and Solana. This gives you flexibility with transaction speeds and fees.

• Widespread Adoption: USDT is accepted on nearly all major crypto exchanges, wallets, and DeFi platforms. This makes it easy to use for trading, lending, and other crypto activities.

• Fast Transfers: Transactions on networks like Tron and Solana are quick and low-cost. This speed is beneficial if you trade frequently.

Cons:

• Transparency Concerns: Tether Limited has faced criticism for its lack of transparency. While the company has taken steps to improve, some investors remain cautious due to past issues.

• Regulatory Risk: Tether has been fined for misleading claims about its reserves. Ongoing regulatory scrutiny could impact USDT's future.

• High Minimum Redemptions: If you want to redeem USDT directly with Tether Limited, you need at least $100,000. This requirement makes it less accessible for smaller investors.

USDT offers high liquidity and multi-chain support, making it versatile for different uses. However, keep in mind the concerns about transparency and regulatory risks when deciding if USDT is right for your portfolio.

 

USD Coin (USDC) is a stablecoin pegged to the US dollar. It was launched in 2018 by Circle, in partnership with Coinbase. Like other stablecoins, USDC aims to maintain a 1:1 value with the US dollar. It provides you with a stable option to store and transfer value in the crypto market. USDC has become the second-largest stablecoin by market cap, with wide acceptance on major exchanges and DeFi platforms.

 

USDC market cap | Source: TradingView 

 

How USDC Works: Issuance and Backing Mechanism

USDC reserves composition | Source: Circle 

 

USDC is issued by Circle, under the oversight of the Centre consortium, which includes Circle and Coinbase. When you buy USDC, Circle ensures that an equivalent amount of US dollars is held in reserve. These reserves include a portfolio of short-dated US Treasuries, overnight US Treasury repurchase agreements, and cash. This structure is designed to maintain the 1:1 peg with the US dollar.

 

Circle issues new USDC tokens when you deposit US dollars into their reserves. Similarly, when you redeem USDC for fiat, Circle burns the tokens, reducing the circulating supply. This process helps keep the value of USDC stable and aligned with its reserves. USDC originally launched on the Ethereum blockchain but has since expanded to networks like Algorand, Solana, and Stellar. While USDC is also popularly used in DeFi along with centralized exchanges (CEXs), it is not as popular as USDT among DeFi traders owing to its lower market cap, liquidity, and fewer supported blockchains.

 

History of Circle and USD Coin (USDC) 

Circle and Coinbase launched USDC in 2018 to create a more transparent and regulated stablecoin. Circle, a global financial technology firm, and Coinbase, a leading crypto exchange, formed the Centre consortium to manage USDC, aiming to set higher regulatory standards for stablecoins. From the start, Circle emphasized transparency by releasing monthly attestation reports, verified by independent accounting firms, to prove that USDC is fully backed by reserves. This level of openness has helped USDC gain trust among investors and traders worldwide.

 

Circle’s Efforts to Improve USDC Transparency, Accessibility, and Adoption

Circle continues to enhance USDC's transparency and utility. In 2023, Circle absorbed the Centre consortium, becoming the sole issuer of USDC. Coinbase took an equity stake in Circle as part of this transition, further solidifying their partnership. Circle shifted a significant portion of USDC's reserves into short-term U.S. treasury securities, aiming to reduce market risks and protect USDC's value. As of August 2024, Circle held over $8.6 billion in U.S. Treasury securities, over $21.1 billion in U.S. Treasury repurchase agreements, and over $1 billion in cash in the Circle Reserve Fund. 

 

Circle has also expanded USDC's presence across various blockchains, including Avalanche and Polkadot, to offer faster and cheaper transactions. Beyond blockchain expansion, Circle’s recent Global Impact Report highlighted USDC's role in transforming aid delivery and remittances. Through initiatives like Circle Impact, USDC is helping humanitarian organizations in countries such as Nepal, South Africa, and Brazil provide financial inclusion for underserved communities. For instance, projects like Kura are leveraging USDC to reduce remittance costs, directly aiding those in need.

 

Circle has also been actively expanding USDC’s accessibility in the Asia-Pacific (APAC) region. It recently partnered with MHC Digital to promote USDC usage among institutional investors in Australia and APAC. The collaboration aims to offer over-the-counter trading services to high-net-worth individuals, hedge funds, and cryptocurrency businesses. Circle is also considering launching a Circle Australian dollar stablecoin as part of its growth strategy.

 

Globally, Circle is working on various partnerships, including a Memorandum of Understanding with SBI Holdings in Japan, and integrations with banking systems in Brazil and Mexico. These developments reinforce USDC’s role as a transparent, compliant, and widely accepted stablecoin in an evolving global market.

 

Pros and Cons of Using USDC

Pros:

• Transparency: Circle releases monthly reports on USDC’s reserves. These reports are verified by independent firms, adding a layer of trust.

• Regulatory Compliance: Circle stores reserves with regulated financial institutions and follows strict compliance measures. This approach can make you feel more secure holding USDC.

• Lower Redemption Threshold: You can redeem USDC for fiat with a lower minimum requirement than USDT, making it more accessible.

• Multi-Chain Support: USDC is available on various blockchains, including Ethereum, Solana, and Algorand. This flexibility allows you to choose networks with lower fees and faster transactions.

Cons:

• Slower Growth: USDC has a smaller market cap than USDT. Its 24-hour trading volume is also lower, which could impact liquidity during peak trading times.

• Regulatory Risks: USDC's close ties to regulated financial institutions can be a double-edged sword. While it adds transparency, it could also expose USDC to stricter regulations.

• De-Pegging Risks: Like other stablecoins, USDC has experienced brief de-pegging events. For example, it dipped below $0.90 during the Silicon Valley Bank collapse in 2023, showing that market events can still impact its value.

USDC offers a transparent and regulated stablecoin option. Its monthly audits and reserve-backed structure make it a reliable choice. However, you should also consider its market cap, trading volume, and potential regulatory risks before adding it to your portfolio.

 

 

USDT vs. USDC: Market share on Ethereum, 2023 vs. 2024 | Source: Dune Anlaytics 

 

Transparency

USDC is known for its transparency. Circle, the issuer of USDC, provides monthly attestation reports. These reports are conducted by independent accounting firms and verify that USDC is fully backed by cash and short-term U.S. treasury securities. This level of transparency helps you trust that each USDC token is properly backed.

 

USDT, issued by Tether Limited, has faced criticism over its transparency. Tether provides quarterly reports, but they have been less detailed compared to USDC's monthly attestations. In the past, Tether faced scrutiny for not fully disclosing its reserves. Although Tether has improved its reporting, some investors still have concerns about its transparency.

 

Winner: USDC

 

Reserves and Backing

USDC is backed by cash and short-term U.S. treasury securities. Circle claims that every USDC token is 100% backed by these assets. This reserve structure aims to maintain the stable 1:1 peg with the US dollar.

 

USDT is also pegged to the US dollar, but its reserves are more diverse. Tether's reserves include cash, cash equivalents, short-term deposits, commercial paper, and other assets. In 2023, Tether moved a significant portion of its reserves into short-term U.S. treasury bills to enhance its backing. However, USDT's reserve composition has been a point of debate, with some questioning the quality of assets held.

 

Winner: USDC for its simpler and more transparent backing.

 

Adoption and Use Cases

USDT has been around since 2014, giving it a first-mover advantage. It enjoys widespread adoption and is the most traded stablecoin by volume. You’ll find USDT on almost every crypto exchange, and it’s commonly used in trading pairs. Its high liquidity makes it a favorite for traders and investors. It's also widely used in the DeFi space, where liquidity is crucial for various applications like lending, staking, and providing liquidity in decentralized exchanges.

 

USDC, while newer, has gained popularity due to its transparency and compliance. Many investors and businesses prefer USDC for its focus on regulatory standards. It’s also widely used in DeFi platforms, especially those prioritizing compliance and security. However, USDC’s trading volume and liquidity are generally lower than USDT’s.

 

Winner: USDT for its higher liquidity and adoption.

 

Regulatory Compliance

USDC takes a proactive approach to regulatory compliance. Circle stores its reserves with regulated financial institutions and complies with U.S. money transmission laws. The company follows strict KYC (Know Your Customer) and AML (Anti-Money Laundering) guidelines. This approach makes USDC a preferred choice for those who prioritize regulatory compliance.

 

Tether Limited claims to follow world-class compliance measures, but it has faced regulatory challenges. In 2021, the Commodity Futures Trading Commission (CFTC) fined Tether $41 million for making misleading statements about its reserves. While Tether has since taken steps to improve compliance, it remains less transparent about its regulatory practices compared to Circle.

 

Winner: USDC for its strict compliance and transparent practices.

 

Blockchains Supported

USDT is available on over 16 blockchains, including:

 

• Ethereum

• Tron

• Solana

• Avalanche

• Cosmos

• Tezos

• Algorand

• Polkadot

This multi-chain support provides you with flexibility in choosing a network with faster transaction speeds and lower fees.

 

USDC also supports 15 blockchains, including:

 

• Ethereum

• Solana

• Algorand

• Stellar

• Avalanche

• Polkadot

• Tron

Both stablecoins offer wide compatibility with various networks, making them versatile for different use cases. However, USDT is available on slightly more networks.

 

Winner: USDT for its availability on more blockchain networks.

 

Transaction Speed and Fees

The transaction speed and fees for both USDT and USDC depend on the blockchain network you choose. On networks like Ethereum, both stablecoins can experience higher fees and slower speeds due to network congestion. However, using them on blockchains like Tron or Solana offers faster transactions and lower gas fees.

 

For example, on the Tron network, USDT transactions are nearly instant and cost less than a cent. USDC on Solana also provides high-speed transfers with minimal fees between $0.003 and $0.030. This flexibility allows you to select the blockchain that best fits your needs for speed and cost-effectiveness.

 

Winner: Tie, as both USDT and USDC offer fast and low-cost transactions on certain networks. Your choice depends on the blockchain you use.

 

In summary, USDT and USDC have key differences in transparency, reserves, adoption, compliance, network support, and transaction speeds. Understanding these factors will help you choose the stablecoin that best aligns with your investment strategy and risk tolerance.

 

Your choice between USDT and USDC depends on your specific needs, trading style, and risk tolerance. Here's a breakdown to help you decide.

 

When to Choose USDT

• High Liquidity: USDT has the highest trading volume among stablecoins, often exceeding $44.8 billion daily. This makes it easier to buy or sell quickly, especially on major exchanges.

• Frequent Trading: USDT is widely accepted across almost every crypto exchange and is available on 13 blockchains, including Ethereum, Tron, and Solana. This makes it ideal for active trading and low-cost transfers.

• DeFi Activities: Many DeFi platforms prefer USDT for its liquidity. If you participate in lending, staking, or liquidity pools, USDT might offer more options.

When to Choose USDC

• Regulatory Compliance: USDC, issued by Circle, provides monthly audited reports and holds reserves with regulated financial institutions. If you value transparency and compliance, USDC is a solid choice.

• Lower Redemption Threshold: USDC allows for direct redemption with a lower minimum requirement than USDT, making it more accessible for smaller investors.

• Long-Term Holding: USDC’s clear backing with cash and short-term U.S. treasury securities offers peace of mind if you’re holding stablecoins long-term.

• DeFi Preferences: Some DeFi platforms favor USDC for its regulatory compliance and transparency. If you use platforms that emphasize these factors, USDC may suit you better.

Beyond USDT and USDC: Other Stablecoin Alternatives

Apart from USDT and USDC, other stablecoins like PYUSD (PayPal USD), FDUSD (First Digital USD), and TUSD (TrueUSD) offer different features. PYUSD integrates easily with traditional payment systems, while FDUSD and TUSD provide transparent backing, similar to USDC. Exploring these options can help diversify your stablecoin portfolio.

 

If you’re comfortable with some uncertainty around reserve transparency, USDT provides more liquidity and network flexibility. If you prefer strict regulatory oversight and easier fiat redemption, USDC might be your best bet. Always consider your trading needs and risk tolerance before making a decision.

 

Read more: All You Need to Know About PayPal USD (PYUSD) - PayPal’s Stablecoin

 

Even though USDT and USDC are stablecoins, they still come with risks. You should consider these factors before adding either to your portfolio.

 

• Regulatory Scrutiny: Regulatory risk is a concern for both stablecoins. USDT has faced more scrutiny, including a $41 million fine by the CFTC in 2021 for misleading reserve statements. This history raises questions about its future regulatory compliance. USDC is seen as more compliant, with Circle adhering to strict regulations and holding reserves with regulated institutions. However, changes in regulations could still affect its usage and market value.

• Reserve Management: USDC is primarily backed by cash and short-term U.S. treasury securities. Circle provides monthly attestation reports, adding transparency and confidence in its 1:1 backing. USDT's reserves are more complex, including cash, short-term deposits, and other assets. While Tether has improved its transparency, concerns remain about the quality of its reserves. A sudden drop in these asset values could impact USDT's stability.

• Market Volatility and De-Pegging Risks: Both USDT and USDC have experienced brief de-pegging incidents. For instance, USDC dropped below $0.90 during the 2023 Silicon Valley Bank crisis. Similarly, USDT slipped 2% in August 2023 on various platforms. While both usually return to their peg quickly, market volatility can still affect their prices.

• Redemption and Liquidity Risks: USDT has a high direct redemption minimum of $100,000, making it less accessible for small investors. USDC offers a lower threshold, providing more flexibility. Liquidity risks can also arise during market stress, potentially impacting both stablecoins' value or causing delays in processing redemptions.

Trading USDT and USDC on KuCoin is straightforward. You can buy, sell, or exchange these stablecoins within minutes. Follow this simple guide to get started.

 

1. How to Buy USDT or USDC on KuCoin

1. Sign Up for a KuCoin Accoun and Log In: Go to the KuCoin website or open the app. Log in to your account. If you don't have an account, sign up and complete the KYC verification.

2. Deposit Funds: To buy USDT or USDC, deposit funds into your KuCoin account. You can use fiat currencies like USD, EUR, or cryptocurrencies you already own.

3. Go to the 'Buy Crypto' Section: Click on 'Buy Crypto' in the top menu. Select 'Fast Trade' if you want to use a credit card, debit card, or bank transfer.

4. Select USDT or USDC: Choose USDT or USDC from the list of available assets. Enter the amount you want to buy.

5. Complete the Purchase: Follow the on-screen instructions to complete the transaction. Your USDT or USDC will appear in your KuCoin account once the purchase is confirmed.

2. How to Sell USDT or USDC on KuCoin

1. Go to 'Markets': From the main menu, click on 'Markets.' Search for the trading pair you want, such as 'USDT/USDC,' 'USDT/BTC,' or 'USDC/ETH.'

2. Select 'Sell': Click on the trading pair and then select the 'Sell' option.

3. Enter Amount: Enter the amount of USDT or USDC you want to sell. You can choose to sell at the market price for instant execution or set a limit order if you want to sell at a specific price.

4. Confirm the Sale: Review the details and confirm the sale. The funds will be added to your KuCoin account balance once the transaction is complete.

3. How to Change USDT to USDC, and Vice Versa?

Trade USDC/USDT on KuCoin spot market 

 

You can easily exchange USDT to USDC and vice versa on the KuCoin platform. Here’s how:

 

1. Log in to KuCoin: Open the KuCoin app or website and log in to your account. If you don't have an account, you'll need to sign up first.

2. Go to 'Markets': Click on the 'Markets' section and use the search bar to find the trading pair (e.g., USDT/USDC).

3. Select the Pair: Choose the trading pair, then click on 'Trade.'

4. Place an Order: To change USDT to USDC, select the 'Buy USDC' option. To change USDC to USDT, select 'Sell USDC.' You can either place a market order for an instant exchange or a limit order if you prefer a specific price.

5. Confirm the Exchange: Enter the amount you want to exchange and confirm the order. Your balance will update once the trade is completed.

You can also convert USDT to USDC conveniently with zero trading fees using the KuCoin Convert feature. 

 

Swap USDT to USDC with zero fees on KuCoin Convert

 

By following these steps, you can easily buy, sell, or exchange USDT and USDC on KuCoin. This flexibility allows you to manage your stablecoin portfolio efficiently.

 

USDT and USDC are the top stablecoins in the market. Both aim to provide stability in the crypto world by maintaining a 1:1 value with the US dollar. However, they have key differences, features, and risks that you should consider. Your choice ultimately depends on what you value more—liquidity or compliance. Make sure to weigh the pros and cons before adding either stablecoin to your portfolio.

 

When deciding which stablecoin is better for your portfolio, consider your needs. If you seek high liquidity and network flexibility, USDT might be the right choice. If you prioritize transparency and regulatory assurance, USDC could be a better fit. Always align your decision with your trading strategy and risk tolerance.

 

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1. Are USDT and USDC safe?

USDT and USDC are generally considered safe. Both are pegged to the US dollar and backed by reserves. However, they have different approaches to transparency. USDC offers monthly audits of its reserves, providing more clarity. USDT has faced criticism over its reserve management and transparency but still maintains a strong market presence. Always do your research and consider your risk tolerance before choosing a stablecoin.

 

2. USDC vs. USDT: Which stablecoin has lower fees?

The fees depend on the blockchain network you use. On networks like Ethereum, both USDT and USDC can have high fees, especially during periods of congestion. However, if you use blockchains like Tron for USDT or Solana for USDC, the transaction fees are much lower. Always check the network fees on your chosen platform to find the most cost-effective option.

 

3. Can I earn interest on USDT or USDC on KuCoin?

Yes, you can earn interest on both USDT and USDC through KuCoin's lending and staking services. KuCoin’s Earn platform allows you to lend your stablecoins to other users or participate in flexible and fixed-term staking products. The interest rates vary based on market demand and the product you choose. Check KuCoin’s Earn section to see the latest interest rates and opportunities.

 

4. How to convert USDT to USDC and vice versa? 

To convert USDT to USDC (or vice versa) on KuCoin, you can use Spot Trading by searching for the USDT/USDC pair, then placing either a market or limit order. Alternatively, you can use Fast Trade for a quicker, simpler exchange without navigating the trading interface. KuCoin also offers a Convert feature, allowing direct swaps between USDT and USDC with zero slippage or fees. These options provide flexibility based on your needs and trading preferences.

 

5. Is USDT equal to USDC? 

Yes, USDT and USDC are generally equal in that they are both stablecoins pegged to the US dollar, aiming to maintain a 1:1 value. However, slight differences can arise due to factors like market sentiment, reserve management, and transparency. USDT tends to have higher liquidity and broader adoption across more blockchains, but it has faced scrutiny over its reserve transparency.