USDT vs BUSD: How Are They Different?

Stablecoins are gaining increasing popularity on the digital asset market. These are cryptocurrencies designed to maintain a fixed price, with their market value tied to a stable asset.

The key difference between stablecoins and other cryptos lies in their backing — gold, fiat, or even other tokens. The primary stablecoins goal is to minimize the risks associated with the volatility that most traditional digital assets face in the crypto market.

Among the most popular stable assets are Binance USD – BUSD and Tether – USDT. If you’re eager to uncover the secret to choosing BUSD vs USDT, let’s explore their key features, their differences and similarities.

A Quick Look at BUSD

Binance USD is a stablecoin backed by U.S. dollars, launched in 2019. What sets BUSD apart is that it was the first stablecoin approved by the New York State Department of Financial Services. BUSD is a digital asset designed to protect investors' portfolios from the other cryptocurrencies’ volatility, including Bitcoin.

BUSD is pegged to the US dollar at a 1:1 ratio. Like other stablecoins, BUSD enables more efficient transactions in DeFi systems since there’s no need to convert tokens into fiat or rely on intermediary platforms.

The stablecoin complies with the ERC-20 token standard and also supports BEP-2. This allows BUSD-ERC-20 and BUSD-BEP-2 holders to exchange tokens between blockchains. The stablecoin’s development was a collaborative effort between the blockchain company Paxos and the cryptocurrency exchange Binance.

A Quick Look at USDT

Tether is the first and most popular stablecoin among well-known cryptocurrencies. It’s backed by the dollar and issued by Tether Limited under the Bitfinex cryptocurrency exchange guidance.

The stablecoin was first launched in 2014 under the name RealCoin, but was rebranded to Tether in November of the same year. The official sale began in February 2015. Initially, the coin was based on the Bitcoin blockchain. Today, Tether supports multiple protocols, including Omni, Liquid Bitcoin, and blockchains like Ethereum, TRON, EOS, Algorand, OMG Network, Bitcoin Cash, and Solana.

Tether was created specifically to serve as a bridge between fiat money and cryptocurrencies. The coin aims to enhance stability, transparency, and transaction fees. Although its value has occasionally dropped below $1, it still maintains its value since it’s pegged to the US dollar and backed by reserves held by Tether Ltd.

There have been instances in the stablecoin’s history where it was claimed that Tether was misleading about its reserves. However, it’s important to note that this hasn’t been proven. Today, Tether is considered one of the most stable and popular coins backed by the dollar. It can be purchased on most major exchanges, including Bitfinex, Binance, CoinSpot, and Kraken.

USDT vs BUSD

If you’re wondering which coin is better to choose BUSD vs USDT, you need to look through their key features to make the right choice.

Tether ranks third in the cryptocurrency market by market capitalization, with a value of $66.7 billion. The stablecoin has an unlimited supply.

BUSD ranks sixth among digital assets, with a market capitalization of $17.4 billion. Like Tether, this stablecoin also has no issuance limit.

The BUSD issuer conducts regular audits in collaboration with the accounting firm Withum to ensure that the reserves in dollars are equal to the token supply at a 1:1 ratio.

In contrast, the USDT reserves haven’t undergone constant financial analysis in the past. However, on June 15, Tether's Chief Technology Officer, Paolo Ardoino, announced the company's intention to conduct a full audit of the stablecoin's reserves. He also mentioned that the accounting firm MHA confirms the reserves backing USDT on a quarterly basis.

Another difference between the stablecoins is that the reserves backing USDT are stored in offshore banks, which are considered less reliable. On the other hand, BUSD has received approval from the New York State regulator and is 100% backed by dollars held in US banks under the Federal Deposit Insurance Corporation jurisdiction.

Key Differences Between BUSD and USDT

In 2019, Tether claimed that each USDT on the blockchain was backed by one physical dollar held by the company. However, it soon became clear that Tether lacked the reserves to support 100% of its issued stablecoins. This revelation caught the users’ attention — and eventually, the authorities stepped in.

The US Commodity Futures Trading Commission fined Tether $41 million for falsely claiming that USDT was fully backed by fiat money. According to the CFTC’s findings, Tether’s reserves included ‘unsecured receivables and non-fiat assets,’ exposing gaps in its backing strategy.

On the other hand, BUSD is regulated, with its physical dollars securely held in US banks insured by the FDIC. The key distinction between BUSD and other stablecoins lies in its full fiat backing. While stablecoins like DAI are collateralized by other cryptocurrencies, BUSD reserves consist solely of cash in the bank, ensuring greater stability and transparency.

Unlike BUSD, most other stablecoins aren’t directly tied to physical money in the real world, making them inherently riskier. In contrast, every BUSD on the blockchain is backed by one US dollar, held securely in Paxos accounts as cash or treasury bills. This ensures unmatched reliability and transparency.

This gives BUSD more reliable reserves compared to USDT, making BUSD financially more stable and less dangerous in the long run. If all BUSD holders decided to redeem their tokens for cash, Paxos would have sufficient reserves to meet the demand. USDT, however, cannot provide the same assurance level.

How USDT and BUSD Differ

One major difference between BUSD and USDT lies in the blockchains they operate on. A blockchain is a ledger used to record transactions, and its unique cryptographic signature ensures that data integrity is maintained, minimizing the risks of hacking or cheating the system.

The use of different blockchains offers several advantages, including enhanced reliability and faster transactions. It also allows users to interact with other blockchain-based digital assets seamlessly. As a result, the price volatility risk is significantly reduced, ensuring a more stable experience.

What Sets BUSD Apart from USDT

If you’re wondering which is better, USDT vs BUSD, you should look through their pros and cons.

Let’s dive into the key differences between these popular stablecoins. Here’s the comparison table based on CoinMarketCap data as of Fall 2024.

Despite their differences, both stablecoins offer several common benefits:

• USD pegged stability. Both BUSD and USDT are pegged to the US dollar at a 1:1 ratio, eliminating concerns about market volatility.
• Fiat-backed issuance. Instead of mining, these stablecoins are issued when their respective teams receive fiat deposits and mint new tokens accordingly.
• Instant transactions. Transactions with BUSD and USDT are lightning-fast and available 24/7, bypassing the need for traditional banking hours.
• Low transaction fees. Transfers are highly cost-effective compared to other cryptocurrencies, thanks to their fiat-backed nature.
• Smart contract integration. Both stablecoins operate on smart contracts, ensuring secure and reliable transactions by enforcing predefined rules and conditions.
• Bank-free operations. Transactions can be conducted directly between parties without requiring assistance from a bank, making the process seamless and efficient.

Today, stablecoins are a top priority for crypto investors and traders due to their ability to provide fast transaction processing, security, and price stability.

Despite USDT having higher volume and market capitalization, experts don’t consider it the leader among stablecoins. This skepticism is due to the gaps in transparency and the Tether’s reserves audit. BUSD, on the other hand, offers greater transparency than USDT. Moreover, BUSD is comparable to USDT in terms of exchange rate and blockchain functionality. Therefore, USDT may be the optimal choice for those prioritizing volume and liquidity when investing in cryptocurrency. However, BUSD is more suitable for those who value regular asset audits.

F.A.Q.

Which is better to choose: USDT or BUSD?

When it comes to popularity and trading volumes, Tether (USDT) clearly leads. However, its main drawback is the reserve reliability issue, which raises concerns for many users. BUSD, on the other hand, appears more stable since its reserves undergo regular audits. There is no definitive answer to which is better — each user must decide what matters more to them: scale or transparency.

Is USDT a cryptocurrency?

Yes, although Tether (USDT) is classified as a stablecoin, it’s still considered a cryptocurrency. Simply put, it’s a digital coin that is pegged to the US dollar.

Is BUSD a cryptocurrency?

Just like USDT, BUSD is classified as a stablecoin due to its peg to the US dollar. Therefore, it's also considered a cryptocurrency type.

What is the difference between USDT and USDC?

The main difference between these stablecoins lies in their approaches to backing. Tether (USDT) is highly liquid, but its reserve transparency raises concerns. USDC, on the other hand, strives to be as transparent as possible, regularly confirming its reserves through independent audits.