A recent study by Visa and Allium Labs revealed that more than 90% of stablecoin transactions do not originate from real users. These findings raise questions about the potential for stablecoins to revolutionize the payments sector despite industry leaders' optimism and overall positive market sentiment.
Potential of stablecoins in payments
Of the staggering $2.65 trillion total transactions in April, only $265 billion was attributable to “organic payments activity,” highlighting the prevalence of unused transactions. This data is highlighted in a dashboard aimed at analyzing stablecoin transactions to distinguish between real user activity and artificial volume.
The revelation challenges the narrative that stablecoins, tied to assets like the dollar, are about to transform the payments industry, an idea supported by fintech giants like PayPal and Stripe. Despite the bullish sentiment expressed by industry leaders, including Stripe's John Collison, the data underscores the emerging stage of stablecoins as a viable payment tool, Bloomberg reported.
Although the potential for stablecoins to disrupt the payments sector is acknowledged, practical hurdles remain. Pranav Sood of Airwallex highlights the need to enhance existing payment infrastructure to facilitate smooth adoption. Furthermore, user-friendly interfaces are crucial, as many consumers still prefer traditional payment methods due to ease of use.
Despite the challenges, analysts expect a significant rise in stablecoin trading in the coming years, with the total value potentially reaching $2.8 trillion by 2028. Recently, Stripe returned to the cryptocurrency space after exiting the sector six years ago. However, this time, the payment company is adopting stablecoins to facilitate transactions and reduce risks.
Institutional stablecoin adoption
Stripe's decision to use stablecoins represents a departure from its previous foray into cryptocurrency, which was marred by volatility and technical challenges. Stablecoins, like Circle's USDC, offer predictable value, smoothing out the extreme volatility associated with traditional cryptocurrencies like Bitcoin.
During a recent presentation, John Collison, co-founder and president of Stripe, demonstrated a seamless cryptocurrency payment method using USDC, emphasizing its stability and suitability for online transactions.
Given their previous experience with Bitcoin payments, Collison acknowledged the shortcomings, calling it a “pretty terrible payment experience.” However, this time, Stripe is betting on stablecoins to provide a more reliable and user-friendly payment solution.
Stripe's return to the world of cryptocurrencies comes at a time when the company is witnessing tremendous growth in the volume of payments, exceeding $1 trillion. With clients including industry giants like Zara and Ford, Stripe continues to strengthen its position in payment processing.
This article was written by Jared Kirroy at www.financemagnates.com.