A recent study conducted by Visa and Allium Labs has revealed that over 90% of stablecoin volumes do not originate from genuine users. This challenges the idea that stablecoins, cryptocurrencies pegged to assets like the US dollar, are on the verge of revolutionizing 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. Out of approximately $2.2 trillion in total transactions, only $149 billion can be attributed to “organic payments activity” conducted by genuine users. This indicates 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. Data provider Glassnode estimated that the record $3 trillion market circulation assigned to digital tokens during the peak of the 2021 bull market was actually closer to $875 billion. Stablecoin transactions often face the issue of double-counting, depending on the platform to which users transfer funds. For example, converting $100 of Circle Internet Financial’s USDC to PayPal’s PYUSD on Uniswap would result in $200 of total stablecoin volume being recorded on-chain. Visa, which handled over $12 trillion worth of transactions in 2020, could potentially lose out if stablecoins become widely accepted as a means of payment.
Analysts at Bernstein 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 combined 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. Similarly, Stripe announced on April 25 that it would allow merchants using its platform to accept stablecoins for online transactions, starting with USDC stablecoins on the Solana, Ethereum, and Polygon blockchains.
Despite the potential of stablecoins, Airwallex has observed limited demand for stablecoin-based payment solutions from its customers. Many still do not perceive the technology as user-friendly enough, according to Pranav Sood, the executive general manager for EMEA at Airwallex. He highlighted that in the US, people are still using checks for 40-60% of business payments, indicating the slow adoption of technology in the market. It is important for existing payment rails to work better in the short-term and mid-term before focusing on the long-term potential of stablecoins. Companies like PayPal and Stripe are making efforts to leverage stablecoins for instant and lower-cost transactions, but there are challenges in overcoming user perceptions and technological barriers.
In conclusion, stablecoins are still in the early stages of development as a payment instrument, with the majority of volumes not originating from genuine users. While stablecoins have the potential to revolutionize the payments industry with their near-instantaneous transactions and low costs, there are challenges such as double-counting and user adoption that need to be addressed. Companies like PayPal and Stripe are leading the way in leveraging stablecoins for online transactions, but there is still limited demand for stablecoin-based payment solutions. It is crucial for the industry to focus on improving existing payment rails before fully embracing stablecoins as a mainstream form of payment.
