Combined, Tether and USDC account for 90% of the total stablecoin market value.
While the use cases for Tether and USDC are similar, USDC seems to be gaining more traction with US-based businesses.
USDC has a clear advantage over Tether when it comes to regulatory and compliance issues.
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The global stablecoin market will grow by 50% in 2025, but two stablecoin giants still dominate the industry: Binding(CRYPT: USDT) and USDC(CRYPT: USDC). According to the latest Motley Fool stablecoin research, they account for a whopping 90% of the total value of all stablecoins.
This leads to an obvious question for crypto investors: Which stablecoin — Tether or USDC — is the best buy right now?
To answer that question, it is useful to keep in mind that these two stablecoins are not traditional investments. They are digital currencies linked 1:1 to the US dollar, and as a result, are often referred to as “digital dollars”. At any point in time, investors can switch between physical and digital dollars, making it easy to move money in and out of the crypto market.
Image source: Getty Images.
The dollar peg has very important implications. A year from now, the price of both Tether and USDC will be exactly $1. Five years from now, the price of both will be exactly $1. And 10 years from now, the price of both will be exactly $1.
You can easily see this in this five-year chart for USDC. While there is some amount of “wiggle” around the $1 mark, the long-term average price is $1.
However, if you simply buy and hold stablecoins without putting them to work in the blockchain world, you will not make any money on your investment. It’s a bit like taking physical dollars and hiding them under your bed.
This is why choosing the “best” stablecoin should be based on utility. In other words, what can you actually do with stablecoins?
The main use case for stablecoins is to earn passive income. Just as you can earn a modest annual return by keeping your physical dollars in a bank, you can also earn a modest annual return by keeping your digital dollars on the blockchain. On some cryptocurrency trading platforms, you can earn anywhere from 3.5% to 5.25% per year on your stablecoin investment.
Stablecoin investors can earn even higher returns through decentralized finance (DeFi), such as by engaging with DeFi lending protocols or yield farming. Here, yields can be as high as 15% — but you’re also taking on a lot more risk.
Stablecoins can also be used on a growing number of online platforms to make purchases. At the checkout point, you can simply scroll through the payment options until you see an option to pay via stablecoin. the Shopify e-commerce platform, for example, recently embraced USDC for online purchases through a new partnership with Coinbase Global.
Admittedly, the use cases for Tether and USDC are largely the same. It’s really just a matter of where to buy, spend money, and invest in crypto. For example, I have always been partial to USDC because it is the stablecoin supported by Coinbase.
However, USDC has a clear advantage over Tether when it comes to regulatory oversight. That’s because USDC is backed by Circle Internet Groupa publicly traded American corporation. In contrast, the Tether stablecoin is backed by Tether Limited, a company currently domiciled in El Salvador (and before that, the British Virgin Islands and Hong Kong).
Now that the new Genius Act for stablecoins has passed in the US, regulatory compliance is very important. For that reason, large financial institutions and large corporations in the United States will likely continue to favor USDC over Tether. Simply stated, Tether is not subject to the same level of regulatory scrutiny as USDC, making it slightly more risky.
Admittedly, Tether is still double USDC in terms of market cap, and is easily the non-US world’s favorite stablecoin. If the goal is simply to swap in and out of different cryptocurrencies, I can see the value of Tether. There is greater liquidity, and therefore, much less “wiggle” around the dollar peg. For active and short-term traders, Tether is probably the better buy.
However, there is really no such thing as a perfect stablecoin. This helps explain why so many different corporations and financial institutions are trying to launch their own stablecoins. There is some core user need they are trying to address. If you are active PayPal user, for example, you might want to consider PayPal’s new stablecoin, which now has a market cap of $3.6 billion.
But dollar for dollar, I think USDC is the best stablecoin to buy right now. It is readily available to buy and sell, there are many opportunities to earn returns, and it is becoming more common as a payment option at checkout. If you’re looking to move physical dollars into digital dollars, it might be worth taking a closer look at USDC.
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Dominic Basulto holds positions at Circle Internet Group and USDC. The Motley Fool has positions in and recommends PayPal and Shopify. The Motley Fool recommends Coinbase Global and recommends the following options: long January 2027 $42.50 calls on PayPal and short December 2025 $75 calls on PayPal. The Motley Fool has a disclosure policy.
Best Stablecoin Buy: Tether vs. USDC was originally published by The Motley Fool
