With the upsurge trend of the cryptocurrency industry, stablecoins have gained significant traction in the space due to their stable prices and fast transaction times. Tether (USDT) and Binance USD (BUSD) are the most popular stablecoins. Besides the stability characteristic of a stablecoin, they also have some notable differences. In this article, we will compare BUSD vs USDT, figuring out the similarities and differences between the two stablecoins to help you decide which might be a better investment.
Key Insights
Here are the key highlights in this BUSD vs USDT article.
- Tether (USDT) and Binance USD (BUSD) are two of the most popular stablecoins in the cryptocurrency space.
- USDT is issued by BitFinex crypto exchange and is the largest stablecoin with a market cap is over $81.79 billion, while BUSD is issued by Paxos and supported by Binance.
- Both stablecoins are fiat-backed and have a 1:1 worth with the US dollar, making them more stable options compared to other cryptocurrencies.
- BUSD is fully audited and regulated, with its token and reserves held in a bank account, while USDT has faced controversies regarding reserve management and decentralization.
- The liquidity stress indicator (LSI) should be considered before trading the stablecoins on an exchange.
BUSD vs USDT: Overview
BUSD (Binance USD) is pegged to the value of the US dollar, meaning that 1 BUSD is always worth 1 USD. BUSD is an ERC-20 token on the Ethereum blockchain but is also available on the BNB chain. BUSD is used for different purposes, which include trading on Binance and other exchanges. It also allows for buying goods and services from merchants accepting BUSD as payment.
On the other hand, USDT, also known as Tether, is also pegged to the US dollar at a 1:1 ratio. The idea behind USDT was to provide a stable alternative to other cryptocurrencies for their price volatility. USDT backing is from a reserve, which means that, for every USDT, there should be a corresponding US dollar held in a bank account.
| BUSD | USDT | |
| Formed | 2019 | 2014 |
| Main Purpose | Stablecoin | Stablecoin |
| Blockchain | Ethereum and BNB Chain | Multichain |
| Auditing Timeline | Monthly | Unclear |
| Backing Asset | USD | USD |
What is USDT?
USDT (Tether) is a stablecoin pegged to the US dollar at a 1:1 exchange rate. Thus, one US dollar is equivalent to one USDT. Tether comes into the limelight as the third-biggest cryptocurrency in the world. It is also the largest stablecoin, with a market is over $81.79 billion. The stablecoin is issued by Hong Kong-based company, BitFinex crypto exchange.
With the ratio of 1:1 pegged to the US dollar, each USDT token is backed by assets held in reserve. Therefore, USDT can be spent, transferred, or exchanged much like any fiat currency.
Tether comes into the mix as being among the first cryptocurrencies to be able to address blockchain-related challenges, such as facilitating transfers of national currency and providing customers with a method for checking the token’s value.
In the past, USDT has faced controversies surrounding its reserve management and its level of decentralization. However, it remains one of the most widely used stablecoins in the market and is accepted by numerous exchanges.
Additionally, BitFinex has been transparent enough in disclosing its cash reserves through monthly transparency reports to address concerns about its stability.
What is BUSD?
BUSD (Binance USD) is a stablecoin issued by Paxos and approved by the New York State Department of Financial Services (NYDFS), with the support of the Binance crypto exchange.
The coin is USD-backed, which means that for every BUSD token in circulation, there is an equivalent number of US dollars held in reserve in a bank account.
Its inception into the market in 2019 was to enable access to fast and flexible transactions for crypto users. BUSD is an ERC-20 token, meaning it is built on the Ethereum blockchain and exists on the BNB chain. The token and the reserves are fully audited and regulated to ensure transparency and security. BUSD holders may be able to exchange stablecoins inter-blockchain, which paves the way for greater flexibility and saving on cost during transfers.
BUSD Roaming Ban
In February 2023, Paxos received a Wells notice from the US Securities and Exchange Commission (SEC) indicating that BUSD was considered an unregistered security. The NYDFS also revealed insufficient reserves backing up the BUSD issued by Paxos, stopping them from minting or releasing.
The claims have hurt the coin, with over $6 billion ousted from BUSD. However, Binance has plans to diversify its stablecoin away from BUSD. Binance has recently launched TrueFi perpetual contracts on its platforms, and it is minting more TUSD to meet its stablecoin needs.
Difference Between BUSD and USDT
1. Blockchains
There are critical differences between the two, which may affect a user’s decision on choosing which one to trade. One vital difference is the blockchains on which the stablecoins are found. BUSD is found in both the Ethereum blockchain and the BNB chain. On the other hand, USDT is more multichain, covering other networks such as Solana, Algorand, Avalanche, and more.
2. Stability
USDT’s stability has been questioned, with the stability of USDT occasionally dipping below $1.00. This dropping has led some skeptics to believe that Tether’s dollar reserves may not be fully backed. However, its value has also risen over $1.00 on multiple occasions.
3. Liquidity Stress Indicator (LSI)
Although different exchanges use the two, one must consider their liquidity stress indicator (LSI) before trading. It comprises the measure of the liquidity risk one may encounter while trading pairs of a particular cryptocurrency on an exchange.
Both stablecoins have different LSIs based on their respective liquidity and trading volumes on different exchanges. As such, it is essential to check each LSI to identify the most suitable exchange for trading them.
BUSD vs USDT: Similarities
1. Backing
Despite their issuance by different companies, the two stablecoins have similarities. The major one is that the two are fiat-backed and have a 1:1 worth with the USD. Thus, they are more stable options compared to other cryptocurrencies.
2. Exchanges Supporting Them
Major exchanges and wallets also support the two and can be redeemed for cash on a 1:1 basis. USDT and BUSD are currently supported by trusted exchanges, including Binance, KuCoin, OKX, Huobi Global, Kraken,.. etc.
According to our research, USDT is now trading on 150 cryptocurrency exchanges with around 19696 trading pairs. In comparison, BUSD is available on 57 cryptocurrency exchanges across 972 trading pairs.
BUSD vs USDT: Which Stablecoin Should You Choose?
Both USDT and BUSD are stablecoins pegged to the US dollar. The option between picking either of the two ultimately comes down to one’s goals for holding the stablecoins. If you are looking for a token that you can use on several exchanges and a wide range of cryptocurrencies, USDT may be an option. If you opt for security and forgo usability, BUSD may be the stablecoin of choice.
BUSD vs USDT – FAQS
Which stablecoin is more widely accepted?
Many exchanges and other crypto-related services widely accept USDT and BUSD. USDT has been in place between the two for a long time, accumulating a higher market cap, which shows that it is commonly used and accepted.
What are the fees associated with using stablecoins?
The fees associated with stablecoins vary depending on the exchange or service used. With the two, fees are somehow low, making them an attractive option for most users.
Is BUSD safe?
BUSD is considered a safe stablecoin. It is backed by the US dollar and audited by third-party firms. It also has a high level of transparency and liquidity due to its association with the Binance exchange.
