30 November 2022 | ZebPay Trade-Desk
Stablecoins give investors experiences of both the traditional world and the crypto world by providing stability through fiat money backing and the ability to quickly transfer funds across blockchain networks. Tether ( USDT), USD Coin (USDC) and Binance USD (BUSD) are some of the most well-known stablecoins in the crypto space. All three stablecoins are backed 1:1 by their respective reserve currencies, giving them stability in value. However, there are some key differences between them. This report explores the similarities and differences between USDT, USDC, and BUSD.
USDT is one of the most popular stablecoins with a market cap of over $69 billion. The stablecoin is issued by Hong Kong-based company iFinex, which also owns the crypto exchange BitFinex. It is pegged 1:1 to the US dollar, and any US Dollar backing the USDT token is held in reserve. As such, USDT can be spent, transferred, or exchanged like any other fiat currency. Tether was one of the first crypto assets to be able to address blockchain-related challenges such as facilitating national currency transfers and providing customers with a method to verify the token’s value.
While USDT has faced controversy over its reserve management and degree of decentralization, it remains one of the most widely used stablecoins in the global market and is managed by accepted on numerous exchanges and compatible with various wallets. The company behind Tether has also been more transparent, disclosing its cash reserves through monthly transparency reports to address concerns about its stability.
Binance and Paxos developed BUSD to give crypto users access to fast and flexible transactions. BUSD is also backed by fiat money and has the same value as a US dollar and can be redeemed 1:1 for cash. BUSD is currently on Ethereum in addition to the BNB chain. As such, BUSD holders can exchange stablecoins between blockchains, allowing for greater flexibility and potential savings in transfer costs. BUSD also has its network with the support of top exchanges such as Huobi and OKX, extended trust wallets and some financial institutions. Unlike some stablecoins, where issues of trust and transparency can arise, Withum, a top-notch accounting firm, audits BUSD regularly.
USDC is also a US dollar-backed stablecoin and was designed to reduce the volatility of bitcoin and other crypto assets through faster money transfers. Developed by Circle Internet Financial, USDC is an Ethereum token that can be stored in a crypto wallet or transferred to the Ethereum blockchain. However, it differs from USDT as it is fully collateralized and transparent, meaning the team are very open about its ecosystem and reserves.
USDC tokens are redeemable 1:1 for USD through Circle’s regulated partner financial institutions, which are subject to monthly audits and certifications to ensure reserve adequacy. This encourages trust and transparency in the value of the stablecoin, in contrast to the controversial management of USDT. USDC is also a more widely used stablecoin, with over $42 billion in circulation and is backed by major exchanges and wallets like Coinbase and Gemini. It has also received confirmation from major financial institutions such as Goldman Sachs, Visa and Bitmain. USDC has evolved into a multi-chain system and is also available natively on blockchains such as Polygon, Avalanche and others.
USDT vs BUSD vs USDC: Key Similarities
Although these three popular stablecoins are issued by different companies, they share several similarities. First, all three are fiat-backed and have a 1:1 value against the USD, making them more stable options compared to crypto assets. They are also widely accepted and supported by major exchanges and wallets and can be redeemed for cash at a 1:1 ratio. They are also regularly audited to promote trust and transparency in their value. Additionally, all three stablecoins are available on the Ethereum blockchain, although all have been expanded to multi-chain.
USDT vs BUSD vs USDC: Key Distinction
There are also important differences that can affect a user’s decision on which stablecoin to use. A key difference is the blockchains on which these stablecoins are available. For example, BUSD remains limited to the Ethereum and BNB chains, while USDC and USDT have become more multi-chain, covering networks like Solana, Algorand, Avalanche, and more. The main benefit of being on multiple blockchains is speed, which allows users to trade assets faster and potentially at lower fees.
Read more: Difference Between USDT and USDC
In terms of stability, USDT is at a disadvantage as it occasionally dropped below $1.00, leading some sceptics to believe that Tether’s dollar reserves may not be fully funded.
USDC and BUSD, on the other hand, did not have similar problems and were pegged to the USD at a constant dollar value. Both stablecoins rarely fluctuate above $1.00, and only move roughly between $0.99 and $1.02 in either direction. Finally, USDT remains a controversial option due to its reserve management. In contrast, USDC and BUSD have been endorsed by major financial institutions and are subject to regular audits to ensure reserve adequacy.
There are also other key differences between the three which you can find in the below table.
|Stablecoin Issuer||Tether||Circle||Binance & Paxos|
|Blockchain Networks||Algorand, Avalanche, EOS, Ethereum, Kusama, Liquid, Polygon, Solana, Tezos||Algogrand, Avalanche, Ethereum, Flow, Hedera, Polygon, Solana, Stellar, Tron||BNB Chain, Ethereum|
|Benefits||Cash and cash equivalents, US treasuries, Commercial paper, Corporate bonds, Fiduciary, deposits, crypto assets, reverse repo rate, secured loans||Cash and cash equivalents, US treasuries, Commercial paper, Corporate bonds, Municipal bonds, Yankee commercial deposits||Cash and cash equivalents, US treasuries|
|Auditors||BDO Italia||Grant Thornton LLP||Withum|
Disclaimer : This report is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. The Company has prepared this report based on information available to it, including information derived from public sources that have not been independently verified. No representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness or reliability of the information, opinions or conclusions expressed herein. This report is preliminary and subject to change; the Company undertakes no obligation to update or revise the reports to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Trading & Investments in cryptos viz. Bitcoin, Bitcoin Cash, Ethereum etc.are very speculative and are subject to market risks. The analysis by Author is for informational purposes only and should not be treated as investment advice.