USDT and USDC: The Distinction Between 'Jianghu' and 'Temples' of Stablecoins

From the name alone, both USDT and USDC belong to stablecoins, which can easily lead one to believe that their nature, risks, and uses are similar. However, upon deeper exploration, the purposes for which they were created are entirely different; one originates from the natural growth amid market chaos, while the other arises from the regulatory system's construction of order, akin to the distinction between 'Jianghu' and 'Temples'.

USDT is driven by 'pragmatism', with the mission of enabling those without bank accounts globally to access US dollars on-chain. Its reserves are opaque, constantly controversial, and often singled out by regulators, yet it boasts a massive trading volume. This seems contradictory, but in reality, it is because the more opaque the system, the easier it is to enter areas excluded by traditional financial systems. The gray trade in the Middle East, inflation refugees in South America, and cross-border traders in Southeast Asia need usable dollars, not perfect assets. USDT offers survival capability; the more chaotic a national financial system is, and the more the society lacks access to US dollars, the greater the demand becomes, which is the logic of the times.

USDC, on the other hand, targets financial institutions, compliant enterprises, and regulated markets. Its reserves are disclosed transparently, custody is clear, and it is influenced by the U.S. regulatory framework, with its structure adjusting to policies; it is an extension of the U.S. regulatory system on-chain. Its advantage lies in legality; when financial institutions have a demand for on-chain US dollars, enterprises require compliant audit reconciliation, or significant capital enters Web3, USDC becomes the preferred choice. However, it is also susceptible to control due to its 'compliance', posing risks such as asset freezes, on-chain address bans, and restrictions on cross-border use, serving as a tool for the digital governance of the dollar.

On the world map, USDT grows wildly in areas lacking financial services, while USDC progresses steadily in regions that rely on rules. One is the dollar for financial refugees, and the other is the dollar for institutional systems; there is no superiority or inferiority between them, only that they are pushed to large scales by different demands. USDT is the market's self-rescue for the dollar, surviving on demand; USDC is the U.S.'s recreation of the dollar, growing through the system. In the future, neither will disappear, because the world has both order and chaos; understanding them is the true significance of understanding stablecoins.

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