Binance USD (BUSD) is a stablecoin which once ranked third after USDT and USDC in market cap, but its minting process has been halted due to regulatory concerns. Read on to find out more.

The Binance USD (BUSD) stablecoin is a product of Binance, one of the world's leading crypto exchanges, and Paxos Trust Company, a regulated blockchain and tokenization infrastructure platform. It stands apart from other 

 as one of the few that complies with the regulations set by the New York State Department of Financial Services (NYDFS).

However, in February 2023, following notice from the Securities and Exchange Commission (SEC) to Paxos that BUSD is an unregistered security, NYDFS ordered Paxos to halt the minting of BUSD. Paxos duly complied with this directive and ceased the minting process soon after, ending its relationship with Binance. The Binance USD supply and 

 have plummeted since the announcement, though it retains its peg to the U.S. dollar.

 For those wondering what is BUSD and what the fuss is about, we'll tell you all you need to know about this stablecoin, from its beginnings to what's next. 

What Is Binance USD (BUSD), and What Is It Used For?

As a crypto stablecoin, Binance USD (BUSD) is tied to the value of a fiat currency. Specifically, it’s pegged to the U.S. dollar (USD), which allows it to maintain a stable price. The redemption rate is one BUSD for one USD. Based on market capitalization, Binance USD is ranked the third-largest stablecoin after 

Binance USD has been issued by Paxos on the Ethereum chain as an 

 token. Binance’s crypto exchange also features wrapped BUSD, which NYDFS doesn’t directly regulate. Known as Binance-Peg BUSD, this 

 runs on other major blockchains such as Polygon, Avalanche and BNB Chain. Users can freely swap between ERC-20–based BUSD and Binance-Peg BUSD between supported blockchains.

The BUSD stablecoin supports a seamless user experience on the Binance exchange with a diverse variety of available BUSD products. It’s also traditionally been a desired option for users concerned about the crypto market's volatility. Since BUSD is one of the 

, users can also trade BUSD on many platforms outside Binance, and even use it as a form of payment for various goods and services.

Under the regulatory oversight of NYDFS, Paxos has conducted monthly audits on the BUSD reserves, alongside with a third-party accounting firm, to ensure they’re 100% backed by cash or cash equivalents, with BUSD’s value supported by assets kept in reserve. Paxos also has the authority to mint and burn BUSD, as well as the ability to freeze or confiscate BUSD assets from malicious users.

The notable partnership between Paxos and Binance and the launch of the BUSD token was announced in September 2019. BUSD immediately became popular upon its launch, stemming partly from a thoughtful marketing strategy. In less than two years, BUSD’s market cap exceeded $1 billion, with its price as a stablecoin remaining relatively stable ever since.

As the entity responsible for minting BUSD tokens, Paxos is also the custodian that ensures enough USD is kept in reserve to back the BUSD tokens. Binance, on the other hand, is responsible for providing customer support and listing BUSD tokens on exchanges.

Regulatory Challenges Faced by Binance USD (BUSD)

Ever since the series of crypto market meltdowns brought about by recent major incidents like the 

, the regulatory crackdown on crypto has gained momentum. Now the third-largest stablecoin, BUSD has also come under scrutiny following the SEC's 

 to Paxos alleging that BUSD isn’t a registered security, and outlining its intention to charge Paxos for violating federal security laws. Paxos released a statement objecting to SEC's claim, stressing that BUSD isn’t categorically considered a security. Just 10 days later, however, NYDFS 

 Binance USD tokens to comply with the order. By Sep 11, 2023, BUSD’s market cap has 

, and will continue to decline as users continue to redeem BUSD. In contrast, its peak was over $23 billion in November 2022.

Until February 2024, Binance USD tokens will continue to be backed by Paxos Trust Company, and holders can redeem them for U.S. dollars at a rate of 1:1 with Paxos. In addition, customers can choose to convert their tokens to 

Notably, Binance has also stated that it will no longer support Binance USD tokens after this date. It has recommended that its users convert their BUSD to 

 (FDUSD) instead, a stablecoin that launched in June 2023 and was listed on Binance in July. There’s no fee for this conversion.

Other Stablecoin Alternatives to Binance USD (BUSD)

As the market capitalization and circulation of BUSD has fallen dramatically due to the recent regulatory issues, Binance has taken steps to reassure its users that their assets are safe.

One of these steps has been to replace the Binance USD held in the Binance emergency insurance fund with 

 (TUSD) and USDT. The purpose of the emergency insurance fund is to provide financial protection to Binance users in the event of security issues. The fund’s value was $1 billion in January 2022, comprising a combination of 

. Now, the fund holds BTC, BNB, USDT and TUSD.

In March, Binance also promoted fee-free trading of TUSD and added numerous TUSD trading pairs in a bid to get users to convert their BUSD holdings to TUSD, resulting in the rapid growth of TUSD's market cap to the fifth position among stablecoins. In late June 2023, however, TUSD 

, trading as low as $0.80. This caused a switch in Binance's strategy to a relatively unknown stablecoin, FDUSD, which recently launched on BNB Chain and Ethereum on Jun 1, 2023. Binance users were encouraged to convert BUSD to FDUSD with offers such as fee-free 1:1 conversions and trades.

While FDUSD’s market cap has risen considerably following Binance's action, it’s still relatively small compared to the two largest stablecoins in the market, USDT and USDC. Additionally, FDUSD has yet to gain traction in the market, with Binance being the only exchange offering trading pairs for this stablecoin.

For now, USDT and USDC will remain the market go-tos for stablecoins due to their history of reliability and wide adoption across exchanges. USDT continues to take the lead with a market cap of over $82 billion, while USDC's market cap is over $26 billion (as of Sep 18, 2023). 

Now that the Binance USD is no longer being minted, many investors are choosing to convert their BUSD holdings to other stablecoins, such as USDT and USDC. Both coins are available via Bybit’s 

 feature, which is compatible with numerous payment types and currencies. USDT can be traded on Bybit as a 

 (USDT/EUR). USDC can be traded as a Spot pair in USDT (USDC/USDT) or EUR (USDC/EUR), and is also available as a 

The tumultuous nature of the cryptocurrency market extends to stablecoins, and has most recently resulted in the decline of the Binance USD token. Since BUSD tokens are no longer being minted and exchanges are already limiting trades, investors holding BUSD may consider alternative stablecoins for their holdings. While Binance is advocating for conversion to FDUSD, it remains to be seen if FDUSD will gain widespread adoption. Therefore, investors holding BUSD should also consider other stablecoins, particularly the two largest, USDT and USDC.

Beginner

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What Is Binance USD (BUSD)?

PayPal USD is a U.S. dollar–pegged stablecoin designed for digital payments and web3 environments. It’s issued by PayPal in collaboration with Paxos.

 have emerged as a groundbreaking solution in the cryptocurrency landscape, offering the best of both worlds: the decentralized benefits of digital currencies, and the stability of traditional 

. By pegging their value to stable assets, stablecoins address the notorious volatility associated with cryptocurrencies, making them more palatable for everyday transactions and as a store of value. 

Amidst the growing roster of stablecoins, a notable entrant has made its debut: PayPal USD. This article will delve into this new stablecoin and explore its features, origins and potential impact in the digital finance realm.

Fully backed by U.S. dollar deposits, short-term U.S. treasuries and similar cash equivalents, PayPal USD can be redeemed 1:1 for U.S. dollars on both the PayPal app and website.

, a renowned name in the digital payment sector, has always been at the forefront of financial innovation. Recognizing the potential of blockchain and the emerging web3 environment, the company decided to venture into the realm of cryptocurrencies and stablecoins. Thus far, PayPal USD is the only stablecoin its platform supports. 

The inspiration behind this project was the desire to bridge the gap between traditional fiat currencies and the digital world, ensuring seamless transactions in both realms.

PayPal USD aims to transform payments across web3 and digitally native environments. With the rise of cryptocurrencies has come the need for a stable instrument that can easily connect to traditional fiat currencies like the U.S. dollar. PayPal USD addresses this need by offering a stablecoin that reduces friction in virtual payments, facilitates instant money transfers and fosters the continued global expansion into digital assets by major brands.

 token issued on the Ethereum blockchain. It's backed 100% by U.S. dollar deposits, short-term U.S. treasuries and similar cash equivalents. As with other USD-backed stablecoins, users can redeem PayPal USD for U.S. dollars at a 1-to-1 ratio. 

Designed for digital payments and web3, PYUSD is compatible with widely used crypto exchanges, wallets and web3 apps. Furthermore, it powers experiences within the PayPal ecosystem and can easily be adopted by crypto exchanges. 

In the upcoming weeks, eligible users in the U.S. with PayPal Balance accounts will progressively be able to use the following features.

On the PayPal app or PayPal website, users in the U.S. can purchase and sell PayPal USD at an exchange rate of 1 USD = 1 PYUSD. There are no transaction fees involved in this process.

Once you’ve purchased PYUSD, you can then use the stablecoin to purchase other supported cryptocurrencies on the PayPal network. Alternatively, you can also use other cryptocurrencies to purchase PYUSD. This can be done with the 

 feature on PayPal. However, please note that 

, and will vary depending upon the USD value of the cryptocurrency that you convert. 

Purchasing items with crypto has never been easier. If you don’t already have a 

), you can still use the PayPal app to purchase items from online stores. Your PYUSD will instantly be converted into fiat to pay for your items. 

Looking for a way to transfer crypto to your family and friends in the U.S.? As long as they have a PayPal account, you can send them PayPal USD without any fees. In fact, you can even transfer your PYUSD to Ethereum 

Since its inception on Aug 7, 2023, PayPal USD has been rolled out to eligible U.S. customers, allowing them to hold, purchase, sell, send and receive the stablecoin. In the near future, the company plans to expand the availability of PYUSD, ensuring more users can benefit from its features. Additionally, there are plans to make it available on platforms such as Venmo.

PYUSD represents the next phase of U.S. dollars on the blockchain. The Paxos Trust Company, which holds a full license as a specialized trust entity, oversees the issuance of PayPal USD and is under the regulatory purview of the New York State Department of Financial Services (

, following an earlier conditional license. 

From September 2023 onward, Paxos plans to release a detailed monthly report on the assets backing PayPal USD, offering full transparency to users. Additionally, an external accounting agency will verify the worth of these reserve assets in line with guidelines set by the American Institute of Certified Public Accountants (

Looking to trade PYUSD tokens? Look no further as Bybit will soon offer the PYUSD/USDT Spot trading pair! To get started, you’ll need to first establish a Bybit account and fund it with cryptocurrency before navigating to the 

Evaluating the investment potential of PYUSD requires a comprehensive understanding of both its strengths and potential risks. On the positive side, PYUSD is backed by a well-established and reputable company, PayPal. This association lends a degree of credibility and trust to the stablecoin, as PayPal has a longstanding history in the digital payment sector and has consistently demonstrated its commitment to innovation and security.

However, like all cryptocurrencies, stablecoins are not without their risks. Even though they’re designed to maintain a stable value by being pegged to traditional assets, external factors can still influence their stability. A case in point is TerraUSD, another stablecoin, which 

 in May 2022. Such instances underscore the inherent volatility and unpredictability of the cryptocurrency market.

While PYUSD presents an intriguing investment opportunity, given its association with a trusted brand like PayPal, potential investors should approach with caution. It's imperative to 

, understand the intricacies of the stablecoin market, and apply the golden rule of investing: only commit funds that you’re prepared to lose.

PayPal USD marks a significant step in bridging traditional finance with the digital world. With its robust features and the backing of a trusted name like PayPal, it holds promise for the future of digital payments. As the landscape of finance evolves, innovations like PayPal USD will play a pivotal role in shaping its direction.

Intermediate

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PayPal USD (PYUSD): The Rise of a New U.S. Dollar Stablecoin

Stablecoins like USDT, USDC, and BUSD are fiat-backed cryptocurrencies. A combined market cap of $120 billion proves that they are here to stay. But what makes them unique? Learn more.

are cryptocurrencies whose values are pegged to a stable asset, mostly fiat currencies. Tether (

) and Binance USD (BUSD) are the three most popular stablecoins, with a combined 

 of $120 billion. However, with the recent buzz around BUSD, there’s no doubt that most investors would be curious to know if BUSD is still worth investing in — or if you should simply pile your investments into USDT, USDC or other 

While stablecoins are known to allow faster, lower-cost and safer transactions without the limitations associated with traditional banking, such as location-based restrictions and lack of financial services during holidays, investors nowadays are uncertain following the May 2022 collapse of TerraUSD (UST).

Despite this, the global cryptocurrency market is forecasted to rise to above 

, proving the popularity of cryptocurrencies worldwide.

Stablecoin is a type of cryptocurrency that’s more reliable and less volatile than its high-profile counterparts like Ethereum and Bitcoin, which means there’s more significant potential for safer investments. 

But which stablecoin should you trade? How do stablecoins compare to fiat currencies? Below, you’ll learn everything about the three main stablecoin supplies and how they differ from each other.

A stablecoin is a cryptocurrency that has its value associated with another asset class, like gold or 

, “True stablecoins are non-interest bearing coins designed to have stable value against a reference currency — say $1 [one U.S. dollar].” Although mainstream crypto assets like Bitcoin are beneficial because you don’t need to trust an intermediary institution, they’re highly susceptible to price fluctuations.

Stablecoins eliminate this flaw by tying the currency’s value to another stable asset, mostly fiat currencies such as dollars or euros.

The coin’s issuer has a “reserve” with assets that assure buyers the issuer can redeem the outstanding coins.

The first stablecoin was created in 2014 and named Tether. Most other stablecoins are modeled after Tether, with users receiving a single token for every dollar.

Theoretically, users can get their original currency — dollars — back at a 1:1 exchange rate. Initially, people used stablecoins to buy common cryptocurrencies, such as Bitcoin, as many exchanges didn’t have banking access.

Thus, stablecoins were a more reliable option, available 24/7 worldwide, and without requiring reliance on traditional banking channels. In addition, money transfers are completed in a matter of seconds.

What Factors Have Contributed to the Growth of Stablecoins?

 gave rise to the concept of stablecoin. Unlike many other currencies, the code in a smart contract helps refine the agreements of a contract to facilitate the seamless transfers, lending and payment of money, with limited human intervention. 

Still, the primary factor fueling the popularity of stablecoins is their almost negligible volatility as compared to conventional cryptocurrencies. On top of that, industry partnerships also contribute to the growth of stablecoins.

For instance, in a recent corporate move, 

, the blockchain maestros behind USDC. This partnership allows Circle corporate cardholders to spend their USDC stablecoin at merchants who accept Visa.

Even better, the U.S. Treasury’s Office of the Comptroller of the Currency (OCC) has 

 for banks to use stablecoins like USDC. 

Thus, federal savings associations and banking channels can now use blockchain for coins like USDC, just as with SWIFT transfers or ACH.

The future seems bright for stablecoin holders, since the currency may offer a widely accepted payment method to cut costs on data processing and international transfers. Moreover, banks may use stablecoins to minimize the threat of digital challenges.

It’s also likely that digital wallets such as Cash App and Venmo — which have recently enabled crypto purchasing — may use stablecoins in the future to make peer-to-peer (P2P) payments a breeze.

Although there are dozens of different stablecoins, the three most common ones are USDT, USDC and BUSD.

 (the symbol for Tether) is a stablecoin pegged to the U.S. dollar at a 1:1 exchange rate. Thus, one U.S. dollar is equivalent to one USDT. Buyers can spend, transfer or trade USDT as they would their regular fiat currency. Tether is issued by iFinex, the Hong Kong-registered company that also owns the crypto exchange Bitfinex.

Initially, USDT was created to tackle the following issues:

Tether is in the limelight as the third-biggest cryptocurrency in the world and continues to be the largest stablecoin by market cap in front of USDC.

However, USDT is known not to be transparent about its reserves. In 2019, they claimed that every USDT is backed by one U.S. dollar in cash, held by the company, but in 2021, Tether (the company) was fined $41 million by the U.S. Commodity Futures Trading Commission (CFTC). This was due to Tether’s false claims that its USDT stablecoins were fully backed by real-world fiat money.

Tether has since had an audit in May 2021 and updated its website to include more details about its cash reserves. A shocking revelation is that it only held 2.9% of its reserves in cash back then. However, that number has since increased, and Tether has begun releasing monthly transparency reports.

Although a few controversies surround Tether’s stability at $1 and the actual amounts of U.S. dollars backing each USDT coin, there are still many reasons to prefer the coin over regular currency, as we’ll discuss below.

 is another stablecoin with its price pegged to the U.S. dollar. It’s issued by Centre Consortium, LLC, which consists of Circle and Coinbase, to speed up fund transfer times and reduce volatility associated with Bitcoin and other cryptocurrencies.

As an Ethereum token, USDC can be stored in a wallet compatible with blockchain. Besides facilitating transfers, USDC also allows users to benefit from higher yields when lending their stablecoins through different 

The popularity of the USD coin has increased significantly in the past few years, with a daily average of $4 billion sent through the Ethereum network in March 2023. Its popularity has also landed itself 

 with leading crypto exchanges, such as Bybit, to launch USDC Spot pairs to promote its adoption. To further support USDC, Bybit has recently also launched its 

 with three events that users can participate in.

, from Algorand, Avalanche, Solana and Tron to Hedera, Polygon and more, growing their adoption as crypto becomes multichain.

 to prove that they have an equivalent amount of USD backing their USDC to assure investors that they’re fully backed. However, the recent news of the USDC depegging has left many uncertain.

 of the Silicon Valley Bank, which held $3.3 billion (or 8%) of USDC reserves on Mar 10, 2023. While federal regulators stated that all depositors, including Circle, would be able to retrieve their funds, it didn’t stop USDC from 

 to a low of $0.869 on the Kraken exchange. 

Circle was then hit with another slew of unfortunate news over the weekend: the closure of Signature Bank resulted in its product, Signet, being closed too. This meant that Circle was no longer able to mint or redeem USDC through its Signet feature. Circle has clarified that it does not hold any USDC reserves with Signature Bank, and only uses it for transactions and settlements. 

According to an update by Circle on Mar 12, it holds $9.7 billion of its USDC reserves in cash, and $32.4 billion in short-dated government securities. Another $5.4 billion of the USDC cash reserves are held at Bank of New York Mellon Corp., and $1 billion at Customers Bank.

Circle reported that it had tried to move its reserves out of Silicon Valley Bank on Mar 9, but this wasn’t done by Friday due to the closure. It holds hope that the transfer will be settled on Mar 13. If the reserves aren’t retrieved, Circle has promised to fill the gap using internal resources, as well as external investments if necessary.

The hopeful news has caused USDC to inch closer to its peg, and as of Mar 13, 2023, its price is at $0.984.

Binance and Paxos founded BUSD to provide transactions with three important qualities: Speed, flexibility and accessibility.

Simply put, Binance USD is a fiat-backed and regulated stablecoin with the same worth as a U.S. dollar. For every Binance USD someone buys, there’s a single dollar held in reserve. As the U.S. dollar’s price fluctuates, this stablecoin’s value also rises or falls accordingly. BUSD holders can exchange their stablecoins for U.S. dollars, and vice versa. Moreover, Binance USD exists on BNB Chain and Ethereum.

Therefore, BUSD holders can exchange stablecoins between these blockchains per their requirements. BUSD also has 

 to prove that they have an equivalent amount of USD backing their USDC to reassure investors.

However, on Feb 13, 2023, it was announced that Paxos had received a Wells notice from the U.S. Securities and Exchange Commission (SEC) indicating that BUSD was considered to be an unregistered security. The New York Department of Financial Services (NYDFS) also revealed data showing that there were not enough reserves backing up the BUSD issued by Paxos, and thus 

 or released. While Paxos denied the claims, it has since ceased the issuance of BUSD and ended its partnership with Binance.

 to $0.20 on Binance following a single market sell order of $647,000. While it immediately regained its peg, it created an opportunity for arbitrage traders to purchase BUSD for under $1 on Binance and sell it on other exchanges for $1. 

As of Mar 1, 2023, more than $6 billion has been pulled out of BUSD. In the meantime, Binance has laid out plans to diversify its stablecoin away from BUSD. Binance has recently launched TrueFi perpetual contracts on its platform, and it’s minting more TUSD tokens as an attempt to meet their stablecoin needs.

This table compares the differences between the three stablecoins that account for most of the stablecoin market.

Back in May 2022, Tether started to lose its market cap against USDC, especially after 

 was depegged. On May 9, UST started to depeg and, as investors worried about the risk of USDT, they also started selling it. Since then, USDT has lost $11 billion in market cap (a drop of about 15%) as holders began exchanging it with USDC instead, along with some also redeeming USDT into USD fiat. At one point, on May 12, USDT even depegged by around 4% on Binance. However, it quickly recovered back to its peg by the end of the day, as redemptions were fully met and investors were reassured.

Due to this event, USDC’s market cap rose from $49 billion to $54 billion, an increase of about 10%. However, as of Mar 13, 2023, its market cap has decreased to about $40 billion due to the collapse of Silicon Valley Bank. Despite this, there’s no doubt that USDC has come a long way from just $4 billion in market cap at the start of 2021.

Following the events of the ban imposed on BUSD, the Paxos-issued stablecoin has now dropped in market cap, from about $23 billion in November 2022 down to $8 billion. BUSD used to rank sixth in terms of market cap, but it has now sunk to 11th place. 

One of the significant differences between these three major stablecoins is in their blockchains. A 

 is a system that records transactions in a way that uses an immutable cryptographic signature to eliminate or minimize the risk of hacking or cheating the system.

Having different blockchains results in a variety of advantages and disadvantages, such as the speed and utility of transactions. While USDT runs on only a single blockchain, USDC and BUSD have multiple blockchain options, allowing buyers to trade and transfer across them. 

Although stablecoins achieve their price stability via collateralization of buying and selling the reference asset, they may fluctuate slightly from their token price, and then gradually return to the original value. USDT’s stability is quite reliable, as the stablecoin has managed to remain steady at around $1. Similarly, Binance USD and USDC are now also close to $1 despite recent events.

However, the 2021 controversy surrounding Tether’s claim that it has enough dollar reserves (while economists and investors suspected that it didn’t), as well as the recent BUSD controversy that caused BUSD to slip to $0.20 on Binance, make both coins less reliable. Compared to USDT and BUSD, USDC is steady and devoid of controversy.

The “volume” of a stablecoin refers to the total trades occurring, while “liquidity” refers to the number of coins available for trading at the set price, which is $1 in this case. As the volume increases, typically, the liquidity does too.

A stablecoin with a high volume makes it easier for investors to trade their coins. As of Mar 13, 2023, the daily trading volume for USDT is $63.3 billion, which is higher than that of the other two currencies. USDC has a volume of $9.3 billion, and the Binance USD stablecoin has a trading volume of $8 billion. The total 

, and has started to drop and is now at 133 billion. USDT remains the largest stablecoin by market cap, with a total 

 of over 72 billion USDT, while USDC has a circulating supply of 40.4 billion USDC and BUSD has a supply of 8.3 billion BUSD.

Despite their differences, stablecoins have the following benefits:

Stablecoins such as USDC can be used for multiple purposes, such as storing value, accessing yield in the market enabled by blockchain, and for payments. Here are some lucrative uses of stablecoins.

Typically, “trending pairs” in cryptocurrency refers to assets that users can trade for one another through an exchange.

These pairs allow buyers to compare the costs of various digital assets. For instance, a 

 will let you know how many USDT equals one BTC.

When you have stablecoins, such as USDC and others, in your possession and want to trade them, you can check for the pairing on the exchange. 

DeFi, or decentralized finance, refers to an ecosystem comprising blockchain-based financial applications that operate without a central administration or third party, such as a bank or other financial institution. Since DeFi employs a peer-to-peer model, everyone can connect irrespective of their location.

, you can lend your stablecoins to a borrower and earn interest. This benefits both borrowers and lenders, since users can get loans at much lower rates than if they used decentralized exchanges (DEXs). Meanwhile, long-term investors can earn interest rates on the coins they lend.

 (automated market maker decentralized exchanges) gaining popularity, users can provide liquidity with their USDC on their favorite pairs, such as ETH/USDC, and earn 

Some of the most popular AMM DEXs include 

 network, passively generating millions in revenue for liquidity providers. However, the downside is that liquidity providers may incur an

Due to the fallout from UST’s depegging and crash affecting thousands of users all over the world, the lack of transparency in USDT — which is the biggest stablecoin in crypto — and the ban of BUSD, regulations will likely be a big topic moving forward.

Stablecoins operate outside of the U.S.'s financial system, and as they get bigger and more mainstream, policymakers and regulators will pay more attention to them to protect the average Joe and prevent systemic risks.

The U.S. Federal Reserve and agencies of other nations are working on offering their own central bank digital currencies (

s), and depending on how they view stablecoins, it could affect the entire crypto market in the future. With rising interest rates and high inflation all around the world, especially in developing countries, a regulated USD stablecoin is likely to receive a lot of attention and adoption.

Although USDT has a high market cap and volume, most economists (interestingly enough) may not consider it to be the best stablecoin. The reasons behind this lack of trust are the gaps in transparency and auditing of USDT.

USDC has greater transparency than USDT. Moreover, it’s comparable to USDT in terms of its exchange rate and blockchain. Thus, USDT is a better pick for people who prefer investing in a cryptocurrency with a higher volume and liquidity, while USDC is preferable if you value transparency.

Comprising almost 90% of the stablecoin market cap, USDC and USDT are undoubtedly the ideal options for investors who want to dabble in the stablecoin market. Since the future of BUSD is still unknown, we’d recommend doing your own research before investing in it.

With vendors becoming comfortable with the idea of using stablecoins, the future of this cryptocurrency class looks hopeful. So if you’re planning to jump on the bandwagon, now is a great time to do so.

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USDT vs. USDC vs. BUSD: How Are They Different?

Keen on learning about the differences between USDT and FRAX? These are the best stablecoins that you can buy to avoid volatility or try your hand at staking.

Looking for a list of top stablecoins? You're in the right place. After the dramatic collapse of TerraUSD (UST) and the recent troubling buzz around Binance USD (BUSD), investors are becoming increasingly skeptical when it comes to an understanding of the actual stability of stablecoins. From being backed by actual dollars in a bank account to relying on a decentralized protocol, stablecoins exist in various forms. This comprehensive guide to the best stablecoins will explain what stablecoins are, the different types to watch for, and some examples of the top stablecoins in the crypto market. 

Stablecoins are cryptocurrencies that have their price pegged to, and are backed by, a singular reserve or group of assets. These price stabilization reserves can range from fiat currencies and national currencies to algorithms or commodities. 

If you're new to crypto, you might be wondering about the use cases of stablecoins. Their most common form of utility is as a medium of exchange. 

Altcoins or even Bitcoin can appear extremely volatile. Their values can wildly fluctuate because of huge inflows and outflows of funds. This can be cumbersome if you're looking to use your crypto as a medium of exchange. Thankfully, with stablecoins, the value of your assets can be preserved as they're meant to maintain their dollar-pegged value. This makes it easy for investors and traders to on-ramp their fiat and convert it into crypto, as the exchange can be made with minimal price volatility.

On top of being a solid medium of exchange, crypto enthusiasts also use stablecoins to participate in 

 (DeFi) projects that involve the lending or staking of stablecoins. Doing this provides investors with passive, low-risk yield as they provide extra liquidity on the platform. This ultimately makes staking or lending stablecoins a viable option for investors during periods of high volatility and/or bearish sentiments.

Now that we've covered the basics of what stablecoins are and their various use cases, let's move on to the different types of stablecoins in the crypto space.

What Are the Different Types of Stablecoins?

Fiat-backed stablecoins are, as the name suggests, pegged to a 

. Fiat currency is essentially not backed by a commodity and is issued by a government. These types of stablecoins typically have a reserve of an equal amount of fiat currency to which they’re pegged. For instance, USD Coin is a top stablecoin that’s largely backed by the U.S. dollar. Fiat-backed stablecoins can be used for transactions, just like other cryptocurrencies, and are considered more reliable.

In essence, these stablecoins are backed by a group of cryptocurrencies. By relying on another cryptocurrency as collateral, the average investor may understandably fear that the crypto-backed stablecoin will be highly volatile. To relieve these worries, such crypto-backed stablecoins are generally overcollateralized to make sure they maintain their value throughout periods of massive price fluctuations.

Unfortunately, UST's implosion has smeared the reputation of the best algorithmic stablecoins, despite solid examples like FRAX and DAI maintaining solid track records. Also called non-collateralized stablecoins, 

 do not have standard fiat or commodity collateral. These decentralized coins are made to help boost stability in market prices without connecting a central authority. Algorithms include special stabilization measures, which are hardcoded on Ethereum smart contracts for the stablecoins. To combat periods of volatility, the supply of algorithmic stablecoins is highly responsive to market forces.

On a more technical level, an oracle contract is used to assist these algorithmic smart contracts in execution. These contracts help by retrieving pricing information for algorithmic stablecoins on other exchanges. Following this, the price periodically enters a rebasing contract to determine if supply should increase or decrease. The contract then analyzes the number of tokens to mint or burn from user wallets based on the information gathered. 

Some stablecoin teams have gone one step further to make their algorithmic stablecoins partially collateralized. For example, FRAX is partially collateralized by fiat-backed stablecoin USDC and FXS, the Frax protocol's governance token.

Like fiat-backed stablecoins, these stablecoins are backed by external assets that aren’t cryptocurrencies. In this case, commodity-backed stablecoins are pegged to precious metals like gold. While commodities also fluctuate in price, they tend to hold value better in times of economic inflation than other forms of assets.

Commodity-backed stablecoins are useful for investing in assets that aren’t always easy to source in a nearby geographical location. For example, physically buying and storing gold can be expensive and inaccessible in many places. However, by purchasing commodity-backed stablecoins, investors can gain access to a tokenized form of rare metals.

In order to determine the best stablecoins, we must first understand what makes a good one. On a fundamental level, the best stablecoins must provide transparency in their holdings. Also, top stablecoins need to have a high trading volume so they can act as a liquid medium of exchange. These two factors combined provide a base on which to build confidence with investors, who can trust the stability of the stablecoin, knowing that it’s backed by a credible reserve of assets and that it can be easily exchanged with other stablecoins.

From UDSC to DAI, here are some of the best stablecoins you can consider including as part of your portfolio. 

If you're a crypto veteran, it's no surprise that 

 (USDT) tops our list of stablecoins. Originally known as Realcoin, the Tether stablecoin was officially released in 2014 and was one of the earliest stablecoins. It’s backed by multiple assets that include traditional currency and cash equivalents, ranging from bonds to commercial paper. While there have been rumors about how Tether isn't fully backed, the team recently made a move to publish 

In the past month (early 2023), 24-hour trading volume ranged between $18 billion and $50 billion, making it one of the top stablecoins if you're seeking a high-volume stablecoin. On some of the top sites for earning interest on crypto, investors can earn between 10% and 12.5% annual interest for USDT lending. While some investors have said that including more detailed reports would help, Tether's transparency regarding how it works and what backs it is positive. Tether plans to release a full audit to satisfy curious potential investors later in 2023.

BUSD is a collaborative project between Binance and Paxos, and is completely backed by U.S. dollars. These funds are also kept in Paxos-owned bank accounts in the U.S. Since everything is done by the book and is regularly audited, BUSD is one of the few fiat-backed stablecoins to be approved by Wall Street regulators. 

 that have led to a halt of BUSD trading on Coinbase, and it was eventually delisted from the crypto exchange titan.

Although BUSD’s trading volume has shrunk significantly, the 24-hour trading volume still shows a steady range from $6.8 billion and $10.2 billion. Another reason why BUSD is attractive is its interest yields. According to Binance, investors can earn up to 15% interest by lending out BUSD on its platform. This huge yield allows the stablecoin to pose a sizable threat to the likes of stablecoin giants like USDT and USDC.

 was founded by Danny An, Tory Reiss, Rafael Cosman and Stephen Kade in 2018 and gained attention because of its reputation as the first stablecoin with real-time audits and on-chain proof of reserves. To ensure each and every TUSD token is fully backed at a 1:1 ratio by the U.S. dollar, accounting firm 

 performs regular monthly audits to guarantee that TUSD is 100% collateralized. This makes it a solid centralized stablecoin to invest in if you're keen on passively staking stablecoins that emphasize regulation above all else.

During the past month, 24-hour trading volume numbers demonstrate steady growth that ranges between about $45 million and $90 million. In terms of yield, investors can earn between 10% and 12.3% interest on their True USD tokens on some of the top lending platforms.

, composed of multiple well-known figures in the crypto world. The coin launched in 2018 and became one of the top stablecoins because it offered an alternative to USDT. While Tether's holdings remained a mystery at the time, USDC provided proof of its backing by assets derived from the U.S. dollar. This transparency and stability gained from its fiat backing led to USDC taking the number two spot in terms of the amount of USDC being traded every day.

This past month, 24-hour trading volume numbers ranged between $1.9 billion and $4.9 billion. For stablecoin investors looking to earn a safe return, they can visit staking and lending platforms to earn between 6% and 14% interest for lending out their USDC.

However, the recent debacle of Silvergate and Silicon Valley Bank caused USDC stablecoin to depeg its dollar value with prices falling below $1. This causes concern among crypto advocates as more exchanges halt or suspend USDC trades. Still, only time will tell the sustainability of USDC. 

 stablecoin in 2017 when the mere idea of a crypto-backed stablecoin seemed risky and unrealistic. While DAI was originally created to provide a non-volatile lending asset for businesses and individuals, Maker eventually gave governance of DAI to MakerDAO. To quell fears of crypto-backed stablecoin volatility, DAI is overcollateralized with the use of Collateralized Debt Position (CDP) smart contracts. These Maker Protocol smart contracts allow users to lock up their collateral assets, such as ETH, in exchange for DAI. 

To crypto investors, DAI immediately stands out because it's backed by crypto assets rather than fiat dollars. If there were a sudden shift in Dai's value, investors could easily convert their DAI tokens to coins like ETH or WBTC because of the CDP smart contracts in play. Even after ETH's fall below $2,000 in the past few months, DAI has managed to maintain its peg because of its diversified reserves and overcollateralized nature. This makes it one of the best stablecoins in the market because DAI has shown its ability to withstand huge crashes. For reference, DAI's 24-hour trading volume numbers this past month fluctuated between $100 million and $308 million.

 is to provide an alternative to fiat-backed stablecoins that are too centralized. Reserve Rights was developed and launched in 2019 by an entity called the Reserve Project. As one of the top crypto-backed stablecoins, 

 uses baskets of contract-managed cryptocurrencies to maintain its peg. As part of its future plans to become one of the biggest and best stablecoins, Reserve Rights’ team plans to eventually leverage more than 100 low-volatility assets to offer more stability to investors. It's this focus on transparency, decentralization and multi-asset collateralization that makes RSV attractive to investors. 

The past month's 24-hour trading volume numbers ranged between $7 million and $11 million. Although the Reserve platform doesn’t specify an interest rate investors can earn for lending, there is a page that provides a detailed explanation of how 

Although it's one of the newer algorithmic stablecoins, 

 has stirred up quite a storm. After the infamous UST crash, 

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