Better Stablecoin Buy: Tether (USDT) vs. USDC

Key Points

• Tether and USDC rank as the two largest stablecoins, and both are pegged 1-to-1 to the U.S. dollar.

• In terms of size, liquidity, and use cases, Tether has the advantage over USDC.

• In terms of regulatory oversight and transparency, USDC has the advantage over Tether.

• 10 stocks we like better than USDC ›

On the surface, there's not a big difference between the two most popular stablecoins, Tether (CRYPTO: USDT) and USDC (CRYPTO: USDC). 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.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Stablecoin use cases

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.

Image source: Getty Images.

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.

Transparency and regulatory issues

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 (NYSE: CRCL), 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.

A dollar is a dollar... is a dollar?

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.

Should you invest $1,000 in USDC right now?

Before you buy stock in USDC, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and USDC wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $661,910!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,125,504!*

Now, it’s worth noting Stock Advisor’s total average return is 1,079% — a market-crushing outperformance compared to 191% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of September 22, 2025

Dominic Basulto has positions in Circle Internet Group and USDC. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.