As the world moves towards making cryptocurrency transactions more accessible, there is a rising demand for stablecoins like USDC and USDT. Many platforms, including 777, have adopted digital currencies, moving away from paper notes and traditional banking systems to provide faster, more secure, and cost-efficient payment solutions.
This blog will make a quick side-by-side comparison between the two to help you determine which one is the safest for investors. Let’s get started!
What Is USDT?
Also referred to as Tether, USDT is a stablecoin that’s pegged to the United States dollar. It was officially launched in 2014 and is backed by the fiat currency.
While there have been many controversies and bad publicity around USDT in recent years, it is still one of the largest and most popular stablecoins in the crypto industry. Its early launch has helped cement its foundations, giving it the first-mover advantage.
Today, USDT has a market capitalization of just over $138 billion.
An Overview of USDC
Launched in 2018 by Circle, USDC is a relatively new stablecoin that’s managed by the Centre consortium. It has gained popularity due to its transparency and regulatory compliance.
Just like Tether, USDC is also pegged to the United States dollar.
USDT Vs. USDC: A Side-by-side Comparison
While both the USDT and USDC are popular stablecoins backed by a fiat currency, they operate in different ways. Although Tether may have a larger market share, the USDC is slowly gaining pace, with many upward trends in the past few years.
Reserves and Transparency
Since USDT has been around for more than a decade, there have been many events in the history of this stablecoin, leading to chaos in the crypto industry.
For example, Tether claimed that it maintains 100% reserves, but an investigation revealed that it had assets worth only 27.6% of its value. This was a massive dent in the “transparent” image the company was trying to build.
On the other, USDC has only been around for a few years. While its company faced serious backlash from investors following the Silicon Valley Bank crisis in 2023, the third largest bank failure in the United States, the stablecoin gained most of its ground following the adverse event.
Circle, the company behind USDC, also works with third-party companies to provide monthly assurances of its reserves to the public.
Transaction Volume
While USDT has the highest market capitalization, USDC is a stronger stablecoin with more transaction volume. In the United States, USDC is more often used than Tether, which may explain the gradual rise in the demand for this stablecoin.
USDT is more popular outside of America. Since it’s a store of value, most foreign investors prefer parking their capital in this stablecoin. That said, recent trends suggest a growing demand in USDC among crypto enthusiasts.
Regulatory Compliance
Compliance with the regulations is of the utmost importance for cryptocurrencies. Lack of adherence to the rules and guidelines set by the regulatory body could lead to legal and financial troubles.
When it comes to complying with the latest regulations, Circle has made its intentions to follow the laws very clear. It holds all of its reserves for USDC at an approved financial institution. This is not the case for the most popular stablecoin.
The company behind USDT has repeatedly mentioned on its website that it uses state-of-the-art compliance measures. However, it fails to shed further light on the tools or techniques employed by the organization to ensure compliance. This lack of transparency is concerning for crypto investors, which is why USDC is a much safer choice.
To stay compliant with the regulations, institutional investors prefer USDC, as the company behind this stablecoin follows the rules set by the regulatory body.
Have USDT or USDC Ever Experienced De-pegging?
USDT and USDC are pegged to the United States dollar, meaning they are designed to track the value of the fiat currency. A reliable way to assess the safety of these digital currencies is to check whether they have experienced any de-pegging incidents recently.
De-pegging refers to the value of a stablecoin deviating from its pegged assets. USDT and USDC have had incidents where their prices dropped below one dollar.
However, these events were short-lived, as both stablecoins immediately returned to their original state.
Are Asset-backed Reserves a Potential Drawback for USDC Investors?
A digital currency backed by assets is often seen as its major strength. Circle publishes reports about its reserves, which is enough to give investors the confidence to invest in this stablecoin. However, its asset-backed reserves can also be a huge drawback.
Since Circle has assets across many different financial institutions, this introduces the element of risk. If any of these companies were to go bust, it could negatively impact the value of USDC.
For example, when Silicon Valley Bank failed in 2023, there was a drop in the price of this stablecoin, as the financial institution was holding around 8% of USDC’s reserves.
Is USDC Safer Than USDT?
Due to its regular audits and adherence to regulations, USDC is much safer than USDT. It’s subjected to transparency laws, and the company publishes monthly reports that instill trust among investors.
There is a concern circulating on the internet that aims to undermine the safety of this stablecoin. If USDC is so secure, why did its market capitalization decline between 2022 and 2023? The answer to this question is far more complex than a simple yes or no.
Between 2022 and 2023, USDC’s market capitalization declined by 50%. However, it’s essential to remember that since it’s a stablecoin, its value didn’t drop.
Experts attribute the massive decline in market capitalization during that period to the crash of Silicon Valley Bank. The failure of one of the largest financial institutions in the country prompted investors to move away from this stablecoin and invest in alternatives like USDT.
That said, recent trends suggest a rise in USDC’s market capitalization, showing that investors are ready to trust this digital currency and the framework behind it once again.
Final Thoughts: Is USDC Safer Than USDT?
Whether you want to invest in USDC or USDT, both are popular options among investors. However, USDC provides greater transparency and regulatory compliance, which is why many consider it to be safer than its alternatives.
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