USDC vs. USDT: Top Stablecoins Compared (2025)

USDC and USDT are the Largest Stablecoins by Market Cap, Trading Volume 

Stablecoins have become a cornerstone of the cryptocurrency ecosystem, bridging the volatility of digital assets and the stability of traditional fiat currencies. The two most popular stablecoins by market cap are currently USD Coin (USDC) and Tether (USDT), both of which are widely used for a variety of purposes, from trading to decentralized finance (DeFi) and beyond. While UDSC is known for its high level of transparency and compliance, USDT is known for its larger market cap and higher level of liquidity, especially on large, international exchanges like Binance. 

Top stablecoins by market cap, Feb. 2025. Source: RWA.xyz. 

According to data from RWA.xyz, as of late February 2025, the market cap of all stablecoins was more than $221 billion, with USDT as the clear market leader with a market cap of $140.9 billion, representing a 63.9% market share. USDC remained the key secondary player with a market cap of $55.2 billion, representing a 24.9% market share. In contrast, USDS, a rebranding of the popular DAI stablecoin, sits in third place with a relatively meager $7.8 billion market cap, representing a 3.5% market share. 

In this article, we’ll compare USDC and USDT to help you understand the key differences, tokenomics, and use cases for these two top stablecoins. Whether you’re a trader looking for liquidity, an institution exploring compliance, or a crypto enthusiast, we’ve got you covered.

What is a Stablecoin?

A stablecoin is a cryptocurrency designed to maintain a stable value by being pegged to a reserve asset, typically a fiat currency like the US dollar. This stability allows stablecoins to provide the benefits of blockchain technology—such as fast, low-cost transactions—while avoiding the price volatility that often plagues other cryptocurrencies like Bitcoin and Ethereum.

There are different types of stablecoins, including:

• Fiat-collateralized stablecoins (e.g., USDC, USDT), backed by fiat currency reserves.
• Crypto-collateralized stablecoins, backed by other cryptocurrencies.
• Algorithmic stablecoins use smart contracts to maintain price stability. 

Currently, more than 95% of stablecoins are fiat-collateralized due to the higher risk profile of crypto-collateralized stablecoins. For example, the largest crypto-collateralized stablecoin, USDS, a rebrand of the popular DAI stablecoin issued by MakerDAO (now Sky), currently represents only 3.8% of the global stablecoin market. 

Algorithmic stablecoins, in comparison, are vastly riskier than fiat or crypto-collateralized stablecoins and have become even less popular, representing around 0.2% of the global stablecoin market. 

This is likely due to multiple fiascos, including the crash of the Terra/Luna ecosystem and the infamous de-peg of the UST stablecoin, which fell from $0.999 on May 7th, 2022, to $0.0662 by May 20th, 2022, leading to $17 billion of losses, and more than $60 billion of combined losses for those who had invested in UST and Terra (LUNA), the native asset of the Terra Luna ecosystem. 

Overview, Founders, and History 

USDC (USD Coin) 

USD Coin (USDC) is a stablecoin backed 1:1 by the US dollar and US dollar equivalents and is issued by Circle and Coinbase. It is fully redeemable on a 1:1 basis for U.S. dollars. Launched in 2018, USDC quickly became one of the most trusted stablecoins in the cryptocurrency market due to its transparency, strong backing, and regular audits. The coin is primarily used within the DeFi ecosystem, for international remittances, crypto trading, and even as a payment method for goods and services.

• History & Background: USDC was launched by Circle and Coinbase through the Centre consortium. With an emphasis on regulatory compliance, USDC has gained significant traction among institutional players, who value the transparency and auditability of the coin’s reserves. USDC was first launched only on the Ethereum blockchain but is not natively offered on more than 15 blockchains, including Solana, Arbitrum, and Base. 
• Use Cases: As a popular choice for DeFi applications, USDC is often used as collateral for lending platforms, liquidity provision in decentralized exchanges (DEXs), and remittances across borders. Its stability and transparency make it a preferred choice for institutional and retail investors alike.

USDT (Tether)

Tether (USDT), the first-ever stablecoin, was launched in 2014 and remains the largest stablecoin by market cap and trading volume. USDT is issued by Tether Limited. Despite its incredible popularity, Tether continues to be the subject of controversy over its reserve backing and questionable audit processes, depsite limited attempts to increase transparency. 

• History & Background: Tether was founded by programmer J.R. Willett and others who sought to create a stable digital currency backed by traditional assets. USDT gained widespread adoption due to its utility in the trading world, allowing users to move between cryptocurrencies and fiat quickly. Tether has faced scrutiny over its lack of audits in the past, but in recent years, it has committed to greater transparency and has started publishing regular reports about its reserves.
• Use Cases: USDT is widely used across the crypto market for trading, remittances, and as a reserve asset in various decentralized applications. It is the preferred stablecoin for major exchanges, including Binance, making it a major player in the liquidity of the cryptocurrency markets.

Transparency, Audits, Backing, and Reserves

While both USDC and USDT serve the same fundamental purpose as stablecoins pegged to the US dollar, they differ significantly in their backing, transparency, and overall usage. Below, we’ll dive deeper into the key differences between these two leading stablecoins.

USDC

One of the major selling points of USDC is its transparency. Circle, the issuer of USDC, ensures that the coin is 100% backed by U.S. dollar reverses and low-risk dollar-like assets, and they conduct regular independent audits of their reserves. These publicly available audits provide a high level of trust and reliability for users and institutional investors. 

For example, as shown in the chart below, according to Circle, as of Feb. 20, 2025, there was $56 billion of USDC in circulation and $56.2 billion of reserves, meaning that USDC is, as of the writing of this article, over-colleratalized by 0.35%. 

However, only $6.8 billion (12%) of the $56.2 billion is held in cash at partner banks. The remaining 88% is held in the Circle Reserve Fund. According to Circle, this is an “SEC-registered government money market fund which holds a portfolio of short-dated US Treasuries, overnight US Treasury repurchase agreements, and cash.” Daily, independent, third-party reporting on this portfolio is available from BlackRock, the world’s largest asset manager. 

USDC reserves as of Feb. 20, 2025. Source: Circle. 

USDT

Tether has historically faced scrutiny regarding the transparency of its reserves. While Tether’s reserves are also supposed to back the supply 1:1, there has been limited visibility into the exact composition of these reserves. Tether has stated that its backing includes a mix of fiat reserves, loans, and other assets like commercial paper. In recent years, Tether has taken some steps to improve transparency, providing quarterly attestations from independent third-party firms. However, it still lags far behind USDC regarding public audits and transparency regarding its reserves. 

According to an October 27th, 2024 statement on X by Tether CEO Pablo Ardoino, Tether’s reserves include approximately $100 billion in U.S. Treasury bonds, over 82,000 Bitcoin valued at around $8 billion at current market prices, and 48 metric tons of gold, worth about $4.5 billion as of the writing of this article. 

While Tether has recently started to provide reserve statistics on its website, its accuracy has been questioned multiple times. As of March 2025, Tether listed its reserves as consisting of 82.35% of “Cash & Cash Equivalents & Other Short-Term Deposits,” 0.01% corporate bonds, 3.7% precious metals, 5.7% in secured loans, and 2.77% in “other investments.”

USDT reserves as of Mar. 25, 2025. Source: Tether. 

Unfortunately, this lack of transparency has led to multiple inquiries and investigations. For example, in late October (right before Ardoino’s X post), the Wall Street Journal claimed that federal investigators were probing Tether for possible violations of anti-money laundering (AML) rules and sanctions violations. Tether pushed back, arguing that these accusations were unsubstantiated. The federal government has been mostly silent on the topic, leading to a lack of clarity about the true nature of the possible investigation. 

In addition, according to a February 2025 report by J.P. Morgan, Tether may have to sell some of its Bitcoin reserves to comply with new stablecoin regulations that could be passed in the next few months. According to the report, “company data suggests that Tether’s reserves are only 66% compliant under the STABLE Act and 83% under the GENIUS Act.”  

According to the J.P. Morgan report: “Reserve requirements under the STABLE Act are stricter, allowing insured deposits, U.S. T-bills, treasury short-term repo and central banks reserves.”

It’s unclear how this sale would impact USDT’s collateralization ratio, especially if Tether is forced to pay significant capital gains taxes due to selling some of its Bitcoin. 

This isn’t the first time Tether has tangled with the U.S. government; for instance, back in 2021, Tether was required to pay a $41 million fine to the U.S. Commodities Futures Trading Commission (CTFC) after the CFTC alleged that it had lied to consumers regarding Tether’s backing. 

Usage and Adoption

USDC

USDC is heavily utilized in regulated markets, especially within decentralized finance (DeFi), institutional trading, and cross-border payments. Its transparent structure and regulatory compliance make it a preferred choice for institutional investors, financial services, and fintech companies. USDC is also increasingly becoming the stablecoin of choice for large enterprises and governments exploring blockchain technology.

USDC market cap by blockchain, Feb. 20, 2025. Source: Defilama. 

According to statistics from Defillama, as of late February 2025, the top blockchains for UDSC were:

• Ethereum: 60.3%
• Solana: 16.5%
• Base: 6.5%
• Hyperliquid: 4.5%
• Arbitrum: 2.7%

Other top blockchains for UDSC included Polygon, Avalanche, BNB Smart Chain, and Berachain. 

USDT

USDT remains the dominant stablecoin in terms of trading volume. It is the go-to stablecoin for exchanges and crypto traders, providing liquidity for market participants to move between cryptocurrencies and fiat assets. While USDC has gained significant ground, USDT’s network effect and long-standing position in the market ensure that it remains the most widely used stablecoin globally, especially in regions with less regulatory scrutiny.

USDT market cap by blockchain, Feb. 20, 2025. Source: Defilama. 

According to statistics from Defillama, as of late February 2025, the top blockchains for UDST were:

• Ethereum: 47%
• TRON: 43%
• BNB Smart Chain: 3.6%
• Solana: 1.4%
• TON: 1%

Other top blockchains for USDT included Avalanche, Arbitrum, Polygon, Aptos, and Near. 

Tokenomics

USDC

Circulating Supply: USDC’s circulating supply grows and contracts based on demand. Circle only issues new USDC when it receives U.S. dollars into its reserves, ensuring that the supply is always fully backed. The coin’s fixed backing by cash and short-term securities offers more stability compared to other stablecoins.

Issuance and Redemption: Users can mint new USDC by depositing U.S. dollars through Circle’s network of partners, and similarly, they can redeem USDC for U.S. dollars when needed. This transparent, one-to-one issuance and redemption model ensures that USDC maintains its peg to the dollar.

USDT

Circulating Supply: USDT has a larger circulating supply compared to USDC. This supply is not always directly tied to new fiat deposits, as Tether also uses loans and other financial products to back its coin. While effective in maintaining its peg, this system raises questions about the long-term sustainability of USDT’s backing.

Issuance and Redemption: USDT operates similarly to USDC in that users can mint and redeem USDT at a 1:1 ratio with fiat or equivalent assets, but Tether’s issuance process is more opaque, with a mix of fiat and other collateral backing the stablecoin. The company has also seen significant demand for USDT due to its liquidity in the crypto markets.

Conclusion

In the USDC vs. USDT debate, both stablecoins offer unique benefits. USDC stands out for its transparency, regulatory compliance, and full fiat backing, making it ideal for institutional investors and those seeking security. On the other hand, USDT continues to lead in liquidity and global adoption, particularly for traders and investors looking for widespread usage and low friction in moving funds across exchanges.

Ultimately, the choice between USDC and USDT will depend on your priorities—whether it’s transparency, liquidity, or ease of use. Both stablecoins play a critical role in the growing cryptocurrency ecosystem, and understanding their strengths will help you make the best choice for your needs in 2025.

Frequently Asked Questions (FAQs)

1. Are USDC and USDT both 1:1 backed by USD?

Yes, both are pegged to the US dollar, but USDC is fully backed by fiat and short-term treasury bills, while Tether’s reserves include a mix of fiat, treasury bills, loans, precious metals, Bitcoin, and other assets.

2. Which stablecoin has better transparency?

USDC is generally considered more transparent due to regular, independent audits of its reserves, whereas Tether has had transparency issues in the past.

3. Can I use USDC and USDT for DeFi?

USDC and USDT are both widely used in DeFi applications, including lending, borrowing, and yield farming.

4. Which stablecoin is better for institutional use?

In general, USDC is favored by institutional investors due to its transparency and regulatory compliance.

5. What is the future of USDC and USDT in 2025?

As regulatory scrutiny increases, USDC may see further adoption due to its compliance focus, while USDT will continue to dominate in liquidity-heavy markets, though its transparency issues may impact future growth.