<div id="readability-page-1">On the surface, there's not a big difference between the two most popular stablecoins, Tether (USDT -0.04%) and USDC (USDC 0.01%). They are both pegged 1-to-1 to the value of the U.S. dollar, and can be easily exchanged for cash at any time. Your investment in these stablecoins will always be worth $1, regardless of how long you hold them in your portfolio. However, not all stablecoins are created equal. There are some subtle differences in how they can be used, how they maintain their value, and how they are regulated and audited. Let's take a closer look at how that affects the decision of which stablecoin to buy. <h2>Stablecoin use cases</h2> If you are a longtime crypto trader, chances are that you are more familiar with Tether than with USDC. Tether was the first official dollar-pegged stablecoin, launching all the way back in 2014. And it is easily the largest. For example, Tether has a market cap of about $172 billion, while USDC's is $74 billion. On a daily basis, there is much more trading in Tether than in USDC. For high-frequency crypto traders, this matters. Tether offers more liquidity than USDC, and trades on more cryptocurrency exchanges than USDC. So if you are trying to move very quickly out of different cryptocurrency pairs across a variety of trading platforms, Tether may make more sense. But if you are a long-term, buy-and-hold investor, this likely doesn't matter. <div><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MzQ0ODYvZGlnaXRhbC1kb2xsYXIuanBnJnc9NzAw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="466" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MzQ0ODYvZGlnaXRhbC1kb2xsYXIuanBnJnc9NzAw"/>Image source: Getty Images. </div> There are also ways to earn passive income with stablecoins, such as by lending them out via centralized cryptocurrency exchanges or decentralized finance (DeFi) protocols. Here too, Tether may have a slight advantage. It is typically easier to find higher-yielding options for Tether than for USDC. To some extent, this reflects the higher risk of holding Tether than USDC, and that's where things get really interesting. <h2>Transparency and regulatory issues</h2> In terms of transparency and regulatory trust, USDC is the clear winner. Since its debut, Tether has been plagued by concerns over its opaque reporting standards and the quality of its reserves. In fact, Tether has even faced legal regulatory action in the U.S. for misrepresenting the quality of its stablecoin reserves. To ensure a stable 1-to-1 peg, stablecoin reserves should be in the form of cash or high-quality cash equivalents (such as short-term Treasury debt). But, in the past, Tether has used everything from commercial paper to commodities to other cryptocurrencies to back its stablecoin. This introduces the very real risk of Tether losing its peg to the U.S. dollar. Tether has lost its peg multiple times, with the highest-profile example being back in 2018, when the value of Tether sank below $0.90. That's not to say that USDC can't also lose its peg to the dollar. In 2023, at the very peak of the U.S. regional banking crisis, there was concern that dollar reserves in failing Silicon Valley Bank might not be available to back USDC. But overall, USDC is generally lauded for its transparency and adherence to the highest regulatory standards. Unlike Tether, which reports on its reserves quarterly, USDC reports on a monthly basis. So there's arguably a greater likelihood of USDC holding its peg than Tether, especially during choppy trading conditions. Moreover, the issuer of USDC, Circle Internet Group (CRCL -4.94%), is now a publicly traded company on the New York Stock Exchange. By way of contrast, the owner of Tether is a Hong Kong-based company with murky ties to mainland China and Taiwan, now doing business in the British Virgin Islands. <h2>A dollar is a dollar... is a dollar?</h2> With the caveat that stablecoins should not be thought of as traditional long-term investments, USDC is the better buy for long-term, buy-and-hold U.S.-based investors. While Tether is more widely available and offers greater liquidity, USDC has a more trusted and transparent ownership structure. This offers greater visibility into its reserves and makes it more trusted by big U.S. financial institutions. But the rules of the road for stablecoins just changed this summer with the passage of the Genius Act. This groundbreaking stablecoin legislation could open up new investment opportunities for stablecoins that simply do not exist today. For example, Tether recently announced the launch of a brand-new stablecoin (known as Tether USAT) that will meet all the new regulatory guidelines for the U.S. marketplace. But for now, all stablecoins are not created alike, and I'm putting my money into USDC, not Tether. </div>

CRCL

The article compares two popular stablecoins, Tether (USDT) and USDC, highlighting their differences. Tether, with a market cap of $172 billion, offers more liquidity and trading options, making it suitable for high-frequency traders. However, USDC is praised for its transparency and regulatory compliance, with a more trusted ownership structure. While Tether has faced scrutiny over its reserves, USDC is seen as a safer long-term investment for U.S.-based investors. The recent passage of the Genius Act may change the landscape for stablecoins, but currently, USDC is recommended over Tether for stability and trust.

Better Stablecoin Buy: Tether (USDT) vs. USDC