Stablecoin Battle: BUSD vs. USDC

The market for dollar-pegged crypto assets is facing a massive revamp as close competitors USDC and BUSD are fighting for market dominance behind Tether (USDT). 

Stablecoins are crypto assets backed by the particular fiat reserve currency or an exchange-traded commodity. Speaking of BUSD and USDC — a one-to-one ratio to the U.S. dollar gives them an opportunity to maintain stability, enables investors to reduce their risk exposure and act as a hedge against the inherent volatility characteristic of the broader crypto markets.

And, in light of the ongoing reshuffle within the stablecoin market, recent entrance by new players, and realignment of capital strewn across the stablecoin room, it’s clear that not all were created exactly equally.

That said, which asset is a more viable option – USDC or BUSD? While they appear similar on the surface, there’s a lot more going on than it seems.

BUSD vs. USDC: an overview

This battle for second emerges as the FUD against Tether remains. There are questions raised about the #1 stablecoin by market capitalization’s lack of transparency and mixed messages. They concern whether USDT is actually collateralized with 100% cash reserves as they claim, triggering outflows into alternative stablecoins with asset backing that they can actually support.

USDC and BUSD are the natural alternatives as the #2 and #3 leading stablecoins by market cap, with both stablecoins claiming to be evenly backed by U.S. dollar reserves. USDT still stays a number one of the top stablecoins, however considering the current troubled times their competitors couldn’t miss a chance to fight for the leadership.   

Moreover, according to Coinbase and Binance, USDC and BUSD are monthly reviewed and audited by established firms and substantiate the veracity of their reserves – and therefore their security and stability as crypto assets and financial instruments.

Both assets serve as a medium of exchange that enables near-instantaneous value transfers regardless of location. If you need to quickly swap any of these or other assets, you can use SimpleSwap for that.

Fast facts on BUSD

1. BUSD is a stablecoin issued by New York-based financial services firm Paxos (PAX) on Ethereum (ETH) in collaboration with the world’s largest exchange, Binance. 
2. Paxos holds BUSD reserves partially in cash in U.S.-domiciled bank accounts, with the other part denominated in U.S. Treasuries. 
3. Through Paxos, investors can buy and sell BUSD with their fiat currency and use it in any transaction that accepts ERC-20 tokens with no operation fees.

Fast facts on USDC

1. Meanwhile, USDC has essentially positioned itself as a tokenized, fully-redeemable iteration of the U.S. dollar that can be traded for an equal amount of cash.
2. USDC is issued by Boston-based fintech giant Circle, which counts BlackRock and Goldman Sachs among its backers, in partnership with Binance’s biggest direct competitor, second-largest crypto exchange Coinbase. 

Like BUSD, Circle claims that USDC reserves are held in cash and U.S. Treasuries across segregated U.S.-domiciled and FDIC-insured accounts.

BUSD vs. USDC: which one to choose

Stablecoins are part and parcel of the crypto ecosystem and its DeFi sector, making it of paramount importance to investors to pick one that is suitable – and above all, trustworthiness and reliability – to use as they see fit.

Some investors think that the stated backing and adherence to strict regulatory compliance gives them an extra layer of security with BUSD and USDC compared to other stablecoins.

And while BUSD and USDC stand out among the safer stablecoin options thanks to their adherence to compliance, transparency, one-to-one peg and to the influential companies behind their creation, there is a glaring difference that separates BUSD from USDC – the blockchains on which they can be used.

BUSD is operating on BNB Smart Chain, BNB Beacon Chain, Avalanche, Polygon, Tron and Optimism whilst USDC is accessible Ethereum, Polygon (MATIC), Solana, Avalanche, Stellar, Hedera, Tron, Algorand and Flow.

Besides market capitalization – with #2-ranked USDC valued at a $32.6 billion market cap as of April 2023 and #3-ranked BUSD valued at $7 billion not so far behind – there’s little that separates USDC from BUSD. But both are actually acceptable choices for investors valuing reliability and trustworthiness.

There’s no better time to demonstrate the importance of transparent stablecoin protocols after the debacle of 2022, when the crypto sector’s collective feet were held to the fire by a sequence of major scandals (e.g. FTX and SVB collapses) and precipitous fallout arising from the subsequent collapses due to the lack of transparency and unceremonious attitude of even the largest protocols about adhering to regulations. 

In summary, see some key details about USDC and BUSD as follows:

How to use BUSD and USDC

We should remember that USDC and BUSD are considered as a stable store of value. Due to their stable value, they are useful for people who want to hold cryptocurrency but are concerned about the volatility. By holding USDC or BUSD, users can protect the value of their holdings without having to worry about large price swings. Now let’s take a look at other use cases of BUSD and USDC:

1. Trading
   
   You can trade them on various crypto exchanges. By trading BUSD or USDC for other cryptocurrencies or fiat currencies, you can benefit from its stable value while still participating in the crypto market.
2. Payments
   
   BUSD and USDC might be used for making payments just like cash. They are accepted by many online retailers, and can be used for buying goods and services. Check out the maps for USDC and BUSD to see the merchants accepting these stablecoins around the world. 
3. Remittances
   
   BUSD and USDC can be used for cross-border payments, making them a useful tool for sending money to friends or family members living in another country. You can send stablecoins instantly and at low cost, without having to worry about exchange rates or high fees.
4. Staking and yield farming
   
   Coins can be staked or used for yield farming on various DeFi platforms, allowing you to earn passive income in crypto. 

The final word 

There’s no question about it: both USDC and BUSD might be good choices for the investors. Depending on the network you are working with you may choose BUSD or USDC (or any other stablecoins if you consider them more convenient).

It’s all a matter of personal preference and whichever stablecoin is supported by your preferred cryptocurrency exchange or crypto wallet. If you wonder how to choose a network when purchasing a stablecoin, make sure to read our previous Blog post.

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.