The stablecoin market has been growing rapidly. It was worth about $205 billion to start the year and now has a value of more than $300 billion.
Since these cryptocurrencies don't fluctuate in value, they work well as a digital-payment method. While stablecoins aren't going to increase in value, you can earn rewards on them.
If you're looking for a U.S. dollar stablecoin, Tether (USDT +0.00%) is the largest by market cap. However, Ripple, the blockchain company behind top-five cryptocurrency XRP, also launched its own stablecoin at the end of last year. Below, I'll take a closer look at how Tether and Ripple USD (RLUSD +0.02%) compare in a few key areas to see which is the better choice.
Image source: Getty Images.
Size and trading volume
The biggest differences between Tether and Ripple USD are their market caps and trading volumes. Tether is worth about $180 billion, as of Oct. 18, and its daily trading volume is more than $200 billion. Ripple USD has a market cap of about $870 million and daily trading volume of $130 million.
Those are huge disparities. If you're going to trade cryptocurrency often, Tether is the clear choice because it has far more liquidity and is available on more crypto exchanges.
This is to be expected, given the two cryptos' respective launch dates. Tether started in 2014, whereas Ripple USD has been around less than a year. Ripple USD is growing quickly, but Tether will be easier to trade for the foreseeable future.
CRYPTO: USDT
Key Data Points
Regulatory compliance and transparency
This competition isn't a clean sweep for Tether. When it comes to trustworthiness, Ripple USD is the superior stablecoin.
The New York Department of Financial Services (NYDFS) has approved Ripple USD, making it one of the few stablecoins that is fully regulated for the U.S. market. Ripple is also transparent regarding its reserves for Ripple USD. It releases monthly attestations on its reserves that are conducted by a third-party accounting firm.
Tether, on the other hand, is notorious for its lack of transparency regarding its reserves. In 2021, the Commodity Futures Trading Commission (CFTC) fined the issuer of Tether $41 million over claims that the stablecoin was fully backed by U.S. dollars. While Tether's issuer now publishes attestations regarding its reserves, it does so every quarter, not every month, like Ripple.
Image source: Getty Images.
Tether is also planning to launch an entirely separate U.S.-regulated stablecoin. If you would prefer a stablecoin that meets U.S. regulations, Tether doesn't fit the bill. It's somewhat concerning that the issuer would rather launch a new stablecoin instead of bringing Tether in line with regulatory requirements.
Rewards opportunities
One of the benefits of stablecoins is that you can earn rewards on your holdings, similar to how you would earn interest on cash in a savings account. There are multiple ways you can do this, including through exchanges and by depositing your tokens in crypto lending protocols.
There are currently a lot more opportunities to earn rewards on Tether than on Ripple USD. Because Ripple USD is a newer and smaller stablecoin, it's not that widely used, and many platforms don't pay any rewards on it. Quite a few exchanges and lending protocols do, in contrast, pay a competitive amount on Tether's tokens.
Choosing between Ripple USD and Tether
Ripple USD and Tether each have notable advantages over each other. Tether's size and volume makes it better for frequent trading. Ripple USD's focus on regulatory compliance is a huge plus from a safety perspective, which is important if you plan to hold stablecoins for the long haul.
However, that doesn't necessarily mean Ripple USD is the better long-term pick. You may also want those stablecoin holdings to generate passive income, and it's much easier to do that with Tether.
I don't think you can go wrong with either of these stablecoins. However, if I was going to pick between the two, I'd go with Tether, at least until Ripple USD has more time to grow.
