USDT versus USDC: mechanisms, reserves and risks

If you have ever used a crypto exchange, you have probably seen two tokens that are worth “one dollar”: USDT and USDC. According to the Bank for International Settlements (BIS), stablecoin growth is concentrated in these two tokens (BIS, 2025). They often appear side by side as if they were equivalent.

In terms of the day’s price, they almost always are. In terms of what lies behind them, they are not. This article compares the two based on documents published by the issuers themselves and by authorities, with the date of each piece of information. If you are not yet familiar with the general mechanism, start with What stablecoins are and how they hold their value.

Same promise, different issuers

USDT is issued by Tether International, S.A. de C.V., a company that, according to its terms of use, moved its domicile to El Salvador (Tether, terms).

USDC is issued by Circle Internet Financial, LLC, a US company, and, in the European Economic Area, by Circle Internet Financial Europe SAS, in France (Circle, USDC terms; Circle, MiCA white paper).

Both follow the same basic model: the company receives dollars, issues the same number of tokens, invests the money in reserves and destroys the tokens when someone redeems them. The differences lie in who can redeem, what is done with the money and the rules each issuer is subject to.

Who can redeem, and how

Direct redemption is what sustains the peg. In both cases, it is not open to everyone.

At Tether, only verified customers can request issuance or redemption. The fees page states a minimum of US$ 100,000 per transaction, a 0.1% issuance fee, a redemption fee of 0.1% or US$ 1,000, whichever is greater, and a US$ 150 account verification fee (Tether, fees).

At Circle, outside Europe, direct redemption requires a Circle Mint account, a service aimed at businesses. The terms say that anyone without such an account cannot redeem USDC with Circle (Circle, USDC terms). In Europe, where USDC is issued as an e-money token under MiCA, Circle’s white paper provides for a right of redemption “at any time and at par value” for holders resident in the bloc (Circle, MiCA white paper).

For most people, then, the way out is to sell the token on an exchange. The price there usually stays close to one dollar because large customers arbitrage against the issuer. In times of stress, it may not.

What is in the reserves

This is the main difference between the two. The figures below come from the most recent reports available on October 8, 2026 and change every period.

USDT: position as of June 30, 2026

According to Tether’s reserves report, with assurance by BDO, the company had US$ 187.75 billion in assets and US$ 183.64 billion in liabilities. The difference, US$ 4.11 billion, is the surplus the company uses as a buffer (Tether, report as of 06/30/2026). The reported composition was as follows (percentages calculated by the editorial team on total assets):

Category	Amount (US$ billion)	Share
Cash, cash equivalents and short-term deposits (US Treasury bills, repos and others)	140.64	74.9%
Precious metals (gold)	18.84	10.0%
Secured loans	13.45	7.2%
Bitcoin	5.80	3.1%
Other investments	5.24	2.8%
Equities and other exchange-traded exposures	3.76	2.0%

Within the first line, US Treasury bills totaled US$ 114.96 billion. The same report shows that equity fell from US$ 6.34 billion at the end of 2025 to US$ 4.11 billion in June 2026, with a negative financial result of US$ 3.17 billion for the half-year. In its release on the quarter, Tether highlighted net operating profit of about US$ 1.5 billion between April and June and more than 146 tons of gold (Tether, July 31, 2026). In the editorial team’s reading, the drop in equity over the half-year illustrates a point: when part of the reserves is in volatile assets, such as gold and bitcoin, the buffer also fluctuates.

Tether also reported, in August 2026, that KPMG issued an unqualified opinion on its 2025 financial statements, with reserves exceeding liabilities by US$ 6.814 billion at the end of that year (Tether, August 13, 2026).

USDC: position as of August 31, 2026

According to Circle’s monthly report, examined by Deloitte, there were 73.32 billion USDC in circulation and US$ 73.40 billion in reserves (Circle, August 2026 report). The composition was as follows:

Category	Amount (US$ billion)	Share
Circle Reserve Fund (Treasury repos, Treasury bills and cash)	62.32	84.9%
Cash at regulated financial institutions	9.59	13.1%
US Treasury bills outside the fund and settlement adjustments	1.49	2.0%

The Circle Reserve Fund is a money market fund registered with the SEC, the US securities regulator, and managed by BlackRock (Circle, Transparency). The USDC terms say the reserves are held in segregated accounts, separate from the company’s own funds, for the benefit of holders (Circle, USDC terms).

How to read this difference

USDC keeps its reserves almost entirely in cash and short-term US government securities, with a small margin above circulation. USDT holds most of its reserves in similar assets, but about a quarter in riskier or less liquid assets, and keeps a larger surplus over liabilities. With this data alone, there is no way to say which design is “safer” in every scenario. What can be said is that the risk is of a different nature: for USDC, it is concentrated in banks, the fund and Circle’s operations; for USDT, it also includes the price of gold and bitcoin and the quality of the loans.

An attestation is not an audit

Both issuers publish attestations: an external auditor checks whether the reserve figures, on a specific date, match the company’s criteria. BDO writes that its conclusion is limited to June 30, 2026 and that it did not assess activities before or after that date (Tether, report as of 06/30/2026). Circle’s attestation covers two dates in August 2026 (Circle, August 2026 report).

Frequency also differs: Tether publishes quarterly reserve reports; Circle discloses reserves weekly and attestations monthly (Circle, Transparency). A full audit of the financial statements is something else, broader in scope. Circle states that Deloitte is its auditor; Tether announced its first full audit, by KPMG, in 2026.

Freezing and address blocking

Centralized stablecoins are not ownerless bearer money. The issuer controls the smart contract and can freeze tokens.

Tether’s terms provide that the company may freeze tokens, add addresses to a blocklist and share information with authorities, including without prior notice (Tether, terms). Circle’s terms provide for blocking addresses and freezing USDC, temporarily or permanently, and for freezing upon receipt of a valid legal order (Circle, USDC terms). In its August 2026 report, Circle excluded from circulation about 129.9 million USDC whose access was restricted to comply with the law or an order from an authority.

For users, this cuts both ways. Freezing helps recover funds from scams and enforce sanctions. At the same time, it means tokens in a wallet can become inaccessible by a third party’s decision.

Track record under pressure

Both tokens have already lost the peg for a period.

In May 2022, during the collapse of TerraUSD, USDT fell to US$ 0.95 before recovering and recorded outflows of more than US$ 10 billion in the following weeks, according to the BIS (BIS, Annual Economic Report 2022).

In March 2023, USDC dropped to 86 cents after Circle reported having US$ 3.3 billion of its reserves stuck at Silicon Valley Bank, about 8% of the total. The peg returned when Circle resumed redemptions on March 13. That weekend, according to the same Federal Reserve analysis, USDT rose slightly above one dollar, as investors moved to unaffected stablecoins (Federal Reserve, FEDS Notes; Circle, March 12, 2023).

The episodes reveal different weaknesses. For USDC, the problem came from a bank holding part of the cash. For USDT, it came from widespread distrust in the sector. Neither case proves the peg will hold in the next crisis.

Regulation: where each one fits

United States. The GENIUS Act, signed into law on July 18, 2025, limits the reserves of authorized issuers to assets such as cash, deposits, Treasury bills with maturities of up to 93 days, repos and government money market funds. Gold, bitcoin and loans do not appear on that list. The law also addresses foreign issuers, which depend on a regime deemed comparable by the US Treasury (GENIUS Act). The expected effective date is January 18, 2027, and the implementing rules were still under consultation in August 2026. As of October 8, 2026, the editorial team has not found an official source defining how USDT will be classified.

European Union. MiCA requires authorization to issue and offer e-money tokens. Circle states that its French subsidiary is an electronic money institution registered with the French prudential authority (ACPR) and has issued USDC under MiCA since July 1, 2024 (Circle, MiCA white paper). ESMA instructed platforms to stop trading, by the end of the first quarter of 2025, tokens of this type without an issuer authorized in the EU, while still allowing custody and transfer (ESMA, January 2025). The statement does not name specific tokens.

Brazil. Central Bank of Brazil (BCB) Resolution No. 521 does not distinguish USDT from USDC. Since February 2, 2026, the purchase, sale and exchange of fiat-referenced crypto-assets by virtual asset service providers have been part of the foreign exchange market, and only providers authorized to operate in it may carry them out (BCB Resolution No. 521). The rule applies to the companies that serve you in Brazil, not to the issuers.

Risks that apply to both

• Loss of the peg. Both have already traded below one dollar. In a more severe crisis, the loss could be greater, even total.
• Issuer risk. You have, at most, a claim against a private company. There is no deposit insurance, and Tether’s terms state that the tokens are not guaranteed by any government or covered by insurance (Tether, terms).
• Freezing. Tokens can be blocked by the issuer’s decision or an authority’s order.
• Network and contract. Both circulate on several blockchains. Sending on the wrong network can mean loss. Circle’s report cites, for example, 993,225 USDC permanently frozen on a blockchain that is no longer supported.
• Exchange. If the stablecoin is held on an exchange, you add its risk: failure, hack or bankruptcy.

What to take from this article

• USDT and USDC have the same goal and the same basic mechanism, but different issuers, reserves and rules.
• According to the 2026 reports, USDC reserves were in cash and short-term government securities; USDT reserves also included gold, bitcoin, equities and loans, with a larger surplus.
• Attestations show a snapshot on one date. They do not guarantee tomorrow’s situation.
• Both can freeze tokens, and direct redemption is restricted to verified customers. For those who buy on an exchange, what counts is the market price.
• The comparison does not tell you which one to use. It shows which risks you take on with each.

To understand the general concept, the models and the regulation in more detail, read What stablecoins are and how they hold their value. For the broader crypto-asset context, see What Bitcoin is and how it works.