A comparison of the top stablecoins on the market



24 March 2023

Stablecoins are cryptocurrencies that offer the stability of fiat currencies on-chain. Due to the stablecoin trilemma, many stablecoin projects have set off trying to optimize for the trilemma, each with their own unique take and flavor.

Here are the most popular stablecoins, ordered by transaction volumes (as of Mar 2023), that you should know about:

Quick Fact Sheet

Accurate as of 21 March 2023

  1. Tether (USDT)
    Tether (USDT) is the most popular stablecoin, with over $76 billion in market capitalization. This fiat-collateralized stablecoin is linked to US dollars through a portfolio mix of assets that seeks to emulate the value of USD. USDT is one of the most commonly accepted stablecoin, accepted by numerous dAPPs, exchanges and merchants.

    However, due to the mix of assets, there has been many FUD (Fear, Uncertainty, Doubt) campaigns against USDT over the years. Critics of USDT often point to the aggressive mix of assets that back USDT as a key failing. By their own admission. USDT is not fully backed in cash or cash equivalents.

    Instead, Tether deploys some of the reserves into purchasing corporate bonds, secured loans and even investments in digital assets. This mix can be found on Tether’s transparency page here. Despite the concerns, Tether remain the most popular stablecoin by market cap, gaining significant marketshare with the recent depeg of USDC as money flowed out of USDC into USDT.

  2. USD Coin (USDC)
    Issued by Circle and tied to US dollars, USDC is a fiat-collaterized stablecoin and the second largest stablecoin by market cap. USDC has been audited by Grant Thorton LLP and Deloitte (from 2023), which provides an additional level of transparency and credibility.

    USDC was particularly hit hard by the recent SVB crisis and associated banking crisis as they held a significant amount of the reserves as deposit in impacted banks. At the height of the crisis, USDC depegged to a low of 0.88 USD/USDC which was a significant concern for the wider crypto industry given the prevalence of USDC across the ecosystem.

    Luckily for the wider ecosystem, the depegged closed over a single weekend. In terms of reserves, USDC can be seen as a “safer” stablecoin (barring any black swan event like their deposit bank becoming insolvent), given that it is 100% backed by cash and cash equivalents.

  3. Binance USD (BUSD)
    BUSD, the popular fiat-backed stablecoin, is causing a stir in the crypto world. Although it is named after Binance, it is actually issued by Paxos. BUSD is currently the third most popular stablecoin, but it is facing legal troubles that threaten its market share.

    According to Paxos, BUSD is 100% backed by reserves held in “fiat cash in dedicated omnibus accounts at insured US banks and/or US treasury bills”, making them supposedly one of the safest fiat-backed stablecoins in terms of reserve mix.

    It’s important to note that there are two forms of BUSD: the regulated version issued by Paxos, and the unregulated version called Binance-Peg USD, which is mined by Binance on other blockchains and pegged to BUSD on a 1:1 ratio.

    However, the NYDFS has recently sued Paxos over BUSD’s potential to be recognized as an “unregistered security”. This led Paxos to suspend the minting of new BUSD tokens but will continue to honor the redemption of BUSD tokens on a 1:1 basis with US dollars.

    While this is a blow to the stablecoin industry, it may be necessary to keep competitors accountable and avoid another FTX-like crisis. Keeping reserve funds secure is crucial for the industry’s success.

  4. Dai (DAI)
    DAI is an algorithmic crypto-collateralized stablecoin issued by MakerDAO, a decentralized autonomous organisation (DAO). As the 4th largest stablecoin by market cap (with a 5 billion market cap), DAI is quickly gaining popularity for its unique approach to governance as it is not controlled by single centralized entity, but instead governed by consensus through the DAO.

    Additionally, unlike other stablecoins that are backed by cash or cash equivalent assets, DAI is backed by digital collateral on an over-collaterized model. You can easily mint DAI by opening a Maker collateral vault and depositing your ETH-based collateral.

    Your collateral is held in an escrow contract, ensuring that your deposit is always larger than your loan, making DAI an over-collateralized algorithmic stablecoin. To redeem DAI, you will simply close out your loan position, redeeming your collateral and burning the corresponding DAI.

    In terms of asset mix, USDC makes up 36% of DAI’s reserves with balance made up primarily of ETH based collaterals. As a result, DAI was also hit slightly as a fallout from USDC’s depeg impacted its own peg, reaching a low of 0.9055, though the rebound to peg was swift due to the heavy overcollaterization of the stablecoin.

  5. TrueUSD (TUSD)
    TrueUSD is a fiat-collaterized stablecoin linked to the US dollar. Launched in 2018 by TrustToken, it sets out to be the only stablecoin that is fully-backed in cash. In 2020, the project was acquired by Techteryx, an Asia-based conglomerate.

    TUSD for the most part was one of the more modest stablecoin projects. However, in 2023, TUSD experienced a form of resurgence driven by rumours that Binance will be boosting the presence of TUSD on its platform. Binance’s decision is a course reversal from their previous decision to deprioritize TUSD and other stablecoins from their platform for the platform’s trading pairs. The decision was primarily driven by the crackdown on BUSD by the NYDFS and SEC.

    Basis their real-time assurance dashboard, TUSD’s reserves are the most pristine compared to other stablecoins as they hold 100% of their reserves in cash spread across 3 main banks – PrimeTrust, FirstDigital and Capital Union. Though, with the ongoing banking crisis, potential investors will do well to monitor the situation of the banks.

Note that this is not financial advice and we encourage everyone to do their own research before making any investment decisions.

Is it legal to use stablecoins for commerce?

Stablecoins have been gaining popularity as a means of commerce, but many people wonder if using them is legal. The good news is that there are no outright regulations banning the use of stablecoins for commerce.

However, some countries are working on frameworks that may subject stablecoins to traditional currency laws. In the United States, the legitimacy of stablecoins depends on the issuer’s transparency record.

In the European Union, stablecoins fall under the Markets in Crypto Assets (MiCA) legislation, which has been passed and will come into effect this year. MiCA will provide additional safeguards for stablecoin users, requiring all registered stablecoins to be 100% backed by fiat currency and other highly liquid assets.

Singapore, the UK, and Hong Kong have also adopted favorable stances towards crypto and stablecoin usage. With proper legislation and rules in place, stablecoins could become an important tool for future business and commerce.

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