More than 90% of stablecoin transaction volumes do not come from real users, according to a new metric co-developed by Visa Inc, suggesting that such cryptocurrency tokens may be a long way from becoming a commonly used means of payment.
The dashboard from Visa and Allium Labs is designed to remove transactions initiated by bots and traders at scale to isolate transactions conducted by real people. Of the roughly $2.2 trillion in total transactions in April, only $149 billion originated from “organic payments activity,” according to Visa.
Visa's findings challenge the argument by stablecoin proponents that digital currencies, tied to assets such as the dollar, are poised to revolutionize the $150 trillion payments industry. PayPal Inc. and Stripe Inc. Among the fintech giants making inroads into stablecoins is John Collison, co-founder of Stripe, in April citing “technical improvements” for being bullish on the tokens.
Read more: Stripe returns cryptocurrency payments on the platform using stablecoins
“This data suggests that stablecoins are still at a very nascent moment in their development as a payment tool,” Pranav Sood, executive general manager EMEA at payments platform Airwallex, said of the data. “That doesn't mean they don't have long-term potential, because I think they do. But the focus in the short and medium term has to be on making sure the existing bars perform much better.”
Tracking the “real” value of cryptocurrency activity using blockchain data has always been a challenge. Data provider Glassnode estimated that the record total market trading allocated to digital tokens of $3 trillion at the peak of the 2021 bull market was actually closer to $875 billion.
With stablecoins, transactions can often be counted twice depending on which platform users are transferring funds to. For example, transferring $100 USDC from Circle Internet Financial Ltd. to PayPal's PYUSD on decentralized exchange Uniswap would record $200 in total on-chain stablecoin volume, said Coy Sheffield, head of crypto at Visa.
Visa itself, which handled more than $12 trillion worth of transactions last year, is among the companies that stand to lose if stablecoins become a generally accepted means of payment.
The total value of all stablecoins in circulation could reach $2.8 trillion by 2028, analysts at Bernstein predicted last year. That would be roughly an 18x increase from their combined distribution now. Because transactions using such tokens are instantaneous and virtually cost-free, many in the cryptocurrency industry see them as well-suited to disrupting the payments sector.
PayPal Launched It launched its stablecoin PYUSD last year, looking for a solution for instant and low-cost transfers within the broader payment infrastructure. Stripe said on April 25 that it allows merchants using its platform to accept stablecoins for online transactions.
However, Airwallex has seen lukewarm demand from its customers for stablecoin-based payments solutions, as many still do not consider the technology user-friendly enough, according to Sood.
“It's a really big hurdle to overcome,” he said. “It's important to remember that in the US, people still use checks for 40% to 60% of business payments, which gives you an idea of where the market really is in terms of technology adoption.”
