A recent study by Visa and Allium Labs has found that over 90% of stablecoin volumes do not come from genuine users. This challenges the idea that stablecoins, which are cryptocurrencies pegged to assets like the US dollar, are on the verge of transforming the $150 trillion payments industry. The joint dashboard developed by Visa and Allium Labs aims to filter out transactions initiated by bots and large-scale traders to isolate those made by real individuals. The data from April shows that out of $2.2 trillion in total transactions, only $149 billion can be attributed to organic payments activity from real users. This suggests that stablecoins are still in the early stages of their evolution as a payment instrument.
Accurately tracking the real value of crypto activity using blockchain data has always been a challenge. For example, during the peak of the 2021 bull market, data provider Glassnode estimated that the record $3 trillion market circulation of digital tokens was actually closer to $875 billion. Stablecoin transactions often face the issue of double-counting, with $100 of one stablecoin being converted resulting in $200 of total stablecoin volume being recorded on-chain. Visa, a company that handled over $12 trillion worth of transactions in 2020, could potentially lose out if stablecoins become widely accepted as a means of payment. Analysts predict that the total value of all stablecoins in circulation could reach $2.8 trillion by 2028, representing an almost 18-fold increase from their current circulation.
Advocates of stablecoins argue that their near-instantaneous transactions and low costs make them ideal for disrupting the payments sector. PayPal introduced its PYUSD stablecoin last year to facilitate instant and lower-cost transfers within its payment infrastructure, while Stripe announced it would allow merchants to accept stablecoins for online transactions. However, Airwallex has observed limited demand for stablecoin-based payment solutions from its customers, as many still do not find the technology user-friendly enough. The market for technological adoption in the US is still in the early stages, with many businesses still using checks for 40% to 60% of payments.
The study’s results suggest that stablecoins are in the early stages of their evolution as a payment instrument. It is important for the short-term and mid-term focus to be on ensuring that existing payment rails work better. While stablecoins have long-term potential, there are still challenges that need to be addressed before they can become widely adopted for payments. The issue of double-counting in stablecoin transactions is one of the challenges that need to be resolved to accurately track the value of crypto activity. With the potential for stablecoins to reach $2.8 trillion in circulation by 2028, there is significant growth expected in the market.
Visa, as a company that handles trillions of dollars in transactions annually, could potentially lose out if stablecoins become widely accepted as a means of payment. The introduction of stablecoins by major companies like PayPal and Stripe indicates a growing interest in leveraging this technology for faster and lower-cost transactions. However, there is still a significant barrier to overcome in terms of user adoption, as many customers do not find stablecoin-based payment solutions user-friendly enough. This highlights the need for further education and development in the stablecoin sector to encourage wider adoption and use for payments.
