USDT vs BUSD

TLDR: USDT and BUSD are both stablecoins that are pegged to the value of the US dollar. They are used on cryptocurrency exchanges as a way to trade cryptocurrencies without the volatility associated with many digital assets. The primary difference between the two is the issuing entity. USDT is issued by Tether, while BUSD is issued by Binance and Paxos.

Some other key differences between USDT and BUSD include:

USDT is available on a wider range of exchanges than BUSD.
USDT has been around for longer and has a larger market cap than BUSD.
BUSD is fully collateralized, meaning that it is backed by an equivalent amount of US dollars held in reserve. USDT, on the other hand, is only partially collateralized, with some critics alleging that it is not backed by enough dollars to fully support its market cap.
BUSD is subject to regular audits by third-party firms to ensure that it is fully collateralized. This is because its issuing partner, Paxos, is based in New York. USDT is not subject to regular audits.
BUSD has recently been issued with a Wells Notice by the SEC and has paused new issuance of the token, which has increased risk for holders.

Ultimately, whether you choose to use USDT or BUSD will depend on your individual needs and preferences. You can continue reading if you want to compare them to find the one that best suits your goals.

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Who issues Binance USD (BUSD)?

BUSD is issued by Binance in partnership with Paxos. Paxos is a financial technology company based in New York that issues Binance USD (BUSD), a stablecoin that is pegged to the value of the US dollar. BUSD is issued by Paxos in a process called "minting". To mint BUSD, Paxos will hold an equivalent amount of US dollars in reserve and then issue a corresponding number of BUSD tokens. These tokens can then be traded on cryptocurrency exchanges, with each token representing one US dollar.

To "redeem" BUSD, holders can exchange their BUSD tokens for the equivalent amount of US dollars held in reserve by Paxos. This process ensures that the value of BUSD remains stable, as it is always backed by an equivalent amount of US dollars. Paxos is a regulated company, and BUSD is subject to regular audits to ensure that it is fully collateralized (backed by enough US dollars to support its market cap). This provides assurance to users that their BUSD tokens can be redeemed for US dollars at any time.

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BUSD Wells Notice by the SEC

Paxos has been ordered by regulators to stop issuing Binance's dollar-pegged stablecoin, BUSD, which is the world's third largest stablecoin, with a market cap of more than $16 billion as of Monday 13th of February. The company was facing a lawsuit from the SEC for offering an unregistered security, and as a result, Paxos will stop minting BUSD next week under guidance from the New York Department of Financial Services.

This news increases the risk for users who choose to hold BUSD, as the regulatory crackdown on the crypto market is quickly tightening. Regulators are now focusing on the crypto market after FTX collapsed and Kraken agreed to end its "staking" program, which offered rewards if investors locked in their holding of certain digital assets.

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Who issues Tether (USDT)?

The Tether (USDT) stablecoin is issued by Tether Limited, a company that provides blockchain-based financial services. Tether Limited is incorporated in the British Virgin Islands, and it is not a regulated entity in the United States.

However, Tether Limited has entered into partnerships with various financial institutions in the United States, such as Deltec Bank & Trust Limited, to provide services to US customers. These partnerships may be subject to certain regulatory requirements in the US, but Tether Limited itself is not directly regulated by any US regulatory agencies.

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BUSD and USDT Adoption in DeFi

USDT arguably has greater adoption throughout decentralized finance (DeFi) protocols across Ethereum, Polygon, Avalanche and all non-Binance Smart Chain networks. Tether (USDT) serves as the backbone of liquidity for key DeFi legos including the Curve Finance and Convex Finance ecosystems.

USDT has more Total Value Locked and a greater overall market capitalization in the market, which suggests it has greater adoption in decentralized and centralized finance. You can get more granular data about stablecoins and their liquidity across various chains on Defillama Stablecoins.

Stablecoin Market Capitalization and Data.

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Final Thoughts: BUSD or USDT?

In summary, both BUSD and USDT are stablecoins that are pegged to the US dollar, used on crypto exchanges to trade cryptocurrencies without the volatility. However, they have differences in the issuing entity, market cap, collateralization, and regulatory compliance. BUSD is fully collateralized and subject to regular audits by third-party firms, while USDT is partially collateralized and not subject to regular audits.

Additionally, BUSD has recently received a Wells Notice from the SEC, which increases the risk for users who hold it. USDT arguably has greater adoption throughout decentralized finance protocols and a greater overall market capitalization. Ultimately, the choice between BUSD and USDT depends on individual needs and preferences.

Author

Emily Shin

Web 3 Writer and Researcher

Web 3 writer with a passion for exploring the rapidly evolving world of decentralized finance (DeFi), non-fungible tokens (NFTs), GameFi, and the broader crypto culture.