In the ever-evolving world of cryptos, stablecoins occupy a unique and crucial place. While bitcoin and ether are renowned for their volatility, stablecoins promise stability and reliability, offering an attractive alternative for investors and users looking to avoid the rollercoaster ride of the markets.
At the end of 2023, stablecoins accounted for 8% of the crypto sector. Around 45 are responsible for replicating the value of the US dollar, while 6 projects focus on the euro (with a market share of 0.02%). The latter, however, are expected to grow in strength as MiCA regulations come into force, which will favour them.
This report aims to provide a comparative analysis of the various assets available on the market. We will explore 13 projects, each with its own characteristics, advantages and disadvantages. Our aim is to derive a clear understanding of what each stablecoin offers, and how they stack up against each other.
We have based our analysis on data from Bluechip , a non-profit organisation of Austrian origin specialising in stablecoin ratings, data from the US rating agency Standard & Poor's , as well as the top experts contacted by us.
👉 Tether, a leader that raises questions
The USDT issued by Tether is the oldest (2014) and most widely used stablecoin on the market. It alone accounts for three-quarters of the supply in circulation, with a capitalisation of up to $90 billion and transaction volumes well in excess of its competitors, with availability on 14 different blockchains.
In the Standard & Poor's study unveiled on 12 December, USDT received a rating of 4 (where 1 is the best and 5 the worst). On Blue Chip, stablecoin gets a D. The main reason for this is Tether's poor transparency. For example, there is very little information about its organisation chart or its banking partners. Its reserve is also the subject of many questions.
Since Q1 2023, Tether has published an audit presented as "independent" and carried out by BDO Italia. But that hasn't evaporated any doubts. "This is a virtually unknown audit firm", points out one specialist.
According to the latest tally dated 30 September 2023, its reserves were mostly made up of :
85.73% liquid assets such as US Treasuries 3.65% "precious metals" 1.92% bitcoin "Despite the criticism, USDT has very rarely experienced depeg problems (loss of parity with the dollar, ed. note) and all users have always been reimbursed even in times of great stress," explains Sébastien Derivaux, a contributor to the MakerDAO and CEO of Steakhouse Financial, a firm that supports DAOs. "This resilience allows it to benefit from a significant network effect, which explains why it remains the most widely used stablecoin on the market today," adds the Frenchman.
As its CEO Paolo Ardoino pointed out in the spring in an interview with The Big Whale , Tether's main markets are "neither in Europe nor in the United States" but essentially "in the regions where the financial system is least developed, i.e. South-East Asia, Africa and South America".
A way of turning away from areas where regulation is most demanding and where Tether is set to lose influence in the coming years.
👉 Circle's USDC, the anti-Tether
The reputation of the second largest stablecoin, with nearly $24 billion in circulation, stands in stark contrast to that of its main competitor, Tether. Its issuing company, Circle, offers more guarantees in terms of transparency.
It has a well-known organisational chart and claims to place regulation at the heart of its development strategy. Last March, in particular, it announced that it had submitted an application to be registered as a PSAN (digital asset service provider) in France and become an electronic money institution (EME), a licence that will be essential if it is to continue offering its stablecoins in Europe from 30 June next year (Circle has also been issuing the EUROC euro stablecoin since 2022).
its banking partners are well known, as is its auditor, none other than Deloitte. The latter provides a monthly report on the state of its reserves, made up exclusively of assets such as US Treasury bills, denominated in dollars and held in segregated accounts. But all is not perfect.
"Circle's claims that USDC's reserves are bankruptcy-proof have yet to be proven, making it less secure than stablecoins overseen by the NYDFS," says Vaidya Pallasena, head of ratings at Bluechip. The proof: the USDC temporarily lost its indexation to the dollar when Silicon Valley Bank went bankrupt last spring, a bank with which it had placed some of its reserves.
Standard & Poor's considers the USDC to be one of the safest projects in the ecosystem, giving it a rating of 2. Bluechip gives it a B+ rating.
👉 DAI, king of decentralised stablecoins
Launched at the end of 2017, DAI ($5.3 billion in capitalisation) is the oldest of the decentralised stablecoins. It was an important innovation because investors could deposit bitcoin (via the WBTC wrapper) and ether as collateral in exchange for a return. This was the beginning of decentralised finance (DeFi).
The MakerDAO protocol handles issuance. Given the structuring of its reserve (which is partly based on volatile assets), the scheme involves over-collateralisation to protect against variations and guarantee the stability of the DAI. For some years now it has also been possible to generate DAI with centralised stablecoins such as USDC, GUSD or even USDP.
Essued on Ethereum, DAI is listed on most of the major market platforms and its stability mechanism has so far always succeeded in allowing it to absorb the shocks associated with market shocks.
Currently, the majority of its reserves are made up of...
47% centralised stablecoins such as GUSD, USDC or PUSD 21% ether 28% real-world assets (RWAs) such as government bonds (since 2023) Hacking is one of the major risks to the protocol. Its smart contracts are regularly audited by PeckShield, a leading security company in the ecosystem.
Although the protocol has a decentralised autonomous organisation, its governance is based on a handful of players and this relative centralisation is perceived as a weak point.
"RWAs increase and diversify the protocol's revenues, but also the risk profile of the assets, as some RWAs introduce credit risk and are less liquid," points out Standard & Poor's, which assigns a rating of 4 to the stablecoin issued by MakerDAO. Bluechip is more generous and gives it a B+ rating.
👉 First Digital USD, the saviour of Binance?
Launched last June in Hong Kong, it is issued by First Digital Group.
Its reserves are held by a custodian in Hong Kong whose identity has not been revealed publicly. At 31 August this year, its reserves consisted of 79% cash deposits and 20% short-term US Treasury bills.
In less than 6 months, its outstanding supply has almost reached $1 billion. The main driver of this growth is the Binance platform, which began listing it last August and has waived fees on the BTC/FDUSD pair. The reason for Binance's move is the scheduled disappearance in February 2024 of BUSD, the exchange platform's 'in-house' stablecoin. The latter had been banned by the US authorities.
Standard & Poor's sanctions the FDUSD with a 4 due to a lack of asset segregation. Bluechip is no more flexible and awards it a C.
👉 PayPal (PYUSD), Paxos (USDP), Gemini (GUSD): the supervised stablecoins
Less popular than USDT or USDC, "these three stablecoins currently offer the best guarantees for retail investors because their reserves are directly supervised by the regulator", explains Benjamin Levit, co-founder and CEO of Bluechip.
In practical terms, they must comply with strict control and issuance requirements, similar in many respects to traditional finance. In the event of bankruptcy, reserves can be directly seized by the New York State Department of Financial Services (NYDFS), which is responsible for supervising them.
For the moment, they are only available via Ethereum, the only network authorised by the regulator, which considerably limits their development.
"The fact that they are supervised by the authorities and therefore easily censored is an argument that is helping to slow down their adoption outside the US and Europe, where this feature is important," says Sébastien Derivaux. "And for Europe and the United States, they are not very useful at the moment since there are already effective payment solutions for individuals", he continues.
Their supply in circulation at the moment is :
$441 million for USDP $156 million for PYUSD $150 million for GUSD While Bluechip assigns an A rating to PYUSD and GUSD, that of the USDP is only A- due to some episodic de-indexations on the dollar price and its average liquidity on secondary markets.
For its part, Standard & Poor's offers a rating of 2 for the USDP and the GUSD thanks to the supervision to which they are subject. PYUSD has not been rated.
👉 LUSD, the governance-free stablecoin
This stablecoin requires no governance or counterparty management as its mechanism is fully automated. "In designing such a stablecoin, the creators of LUSD took the decision to eliminate the risks associated with human judgement and prioritise the technical risks," explains Vaidya Pallasena, in charge of ratings at Bluechip.
It is issued in exchange for an over-collateralised guarantee. This is set at a minimum of 110% by the protocol. It is currently 250%.
For the time being, the LUSD is not listed by the main market exchange platforms such as Coinbase or Binance. Its market capitalisation currently stands at $185 million.
"For most of its existence, the LUSD has traded at a price above one dollar, which can have a significant impact by making borrowing costs less predictable for users," adds Brice Berdah.
Bluechip gives it an excellent A rating, while Standard & Poor's has not analysed it.
👉 GHO (Aave) and crvUSD (Curve) are trying to make their mark
These two stablecoins were launched in mid-2023 and their indexation to the dollar has proved unstable with greater difficulties for Aave's GHO. Currently, no major exchange platform has agreed to list them.
Having their stablecoin allows these two DeFi giants to secure additional revenue while offering a stable asset to their users.
Aave's GHO is generated by depositing cryptos like ether as collateral. For now, it has traded at a 2-3% discount to the US dollar. "Even if the GHO presents low risks in terms of management, decentralisation and governance, its de-indexations against the dollar are its major shortcoming for the moment", analyses Brice Berdah, a DeFi expert.
For its part, Curve's crvUSD has a mechanism identified as more robust operating on the "LLMMA" model. Instead of liquidating a user's guarantee all at once in the event of market turbulence, the protocol will gradually convert it. This mechanism should prevent large volumes of collateral being dumped on the markets simultaneously.
Brice Berdah nevertheless criticises the crvUSD for "varying its borrowing rates too widely".
To date, their market capitalisation stands at
$120 million for the crvUSD $34 million for the GHO Standard & Poor's and Bluechip have not yet analysed these projects.
👉 Angle Protocol's ambitious agEUR
This decentralised euro-denominated stablecoin was launched by the French-originated project Angle Protocol. Its market capitalisation is currently €34 million. Unlike the majority of decentralised stablecoins, investors do not have to over-collateralise their position to generate agEUR. This makes it much more efficient.
"We believe that the proliferation of stablecoins will lead to a fragmentation of liquidity. With this in mind, we want to position ourselves as a liquidity hub that can generate both yield and stablecoin for institutional investors," Pablo Veyrat, CEO of Angle Labs, the commercial structure behind the Angle protocol, tells The Big Whale.
The stability of agEUR is based mainly on the deposit of stablecoins (EUROC and USDC from Circle). Volatility risk is partly covered by a futures platform internal to the protocol. This is its major originality compared with Maker, to which it is presented as the most relevant heir (even if their size is incomparable).
Aside from a significant lag observed in mid-March following the hack of the Euler protocol on which Angle's reserve was exposed (which ended well), the agEUR price has remained stable overall since its launch.
Standard & Poor's and Bluechip have not yet analysed it.
👉 CoinVertible (EURCV), the safest in Europe
Launched last April, it is the only stablecoin on the market to be issued by a traditional banking player. In this case, it is Société Générale via its subsidiary SG-Forge, the only player with PSAN authorisation in France to date (as distinct from the less restrictive registration). This is the highest level of regulation in France in the digital assets sector.
Much smaller than the competition with a capitalisation of €10 million, its access has been deliberately restricted by being offered only to players validated by Société Générale. Nevertheless, the EURCV has been listed since early December on the Bitstamp exchange platform, which should accelerate its development (but it is not yet possible to withdraw it on an external wallet).
"The EURCV is a digital asset but we have structured it as a traditional financial instrument", explains to The Big Whale Jean-Marc Stenger, CEO of SG-Forge. "If there were to be a problem, any token holder could go to the fiduciary agent (a trust independent of Société Générale) to recover euros. As far as we know, no stablecoin in the world offers this level of guarantee."
Standard & Poor's and Bluechip have not yet analysed this project, but it should get an excellent rating when they do. To date, its reserve is based solely on cash (and not government bonds), which further strengthens its stability.
👉 The JPM Coin, JP Morgan's stablecoin
Very different from other projects, this stablecoin aims to improve interbank transfers within the flows of US bank JP Morgan. The giant recently said it handles the equivalent of $1 billion worth of transactions a day.
In exchange for a euro or dollar deposit in one of its bank accounts, users receive the equivalent in digital assets, which are then instantly transferred via the Onyx network, a private blockchain inspired by Ethereum that guarantees the confidentiality of exchanges and high transaction speeds. The system promises to operate 24 hours a day, 7 days a week.
The JPM Coin must stand out because it was designed to have an existence solely within JP Morgan.
