Over 90% of Stablecoin Transaction Volumes Are Not From Genuine Users: Visa Study

A recent study conducted by Visa and Allium Labs has found that more than 90% of stablecoin volumes do not originate from genuine users.

The findings challenge the notion that stablecoins, which are cryptocurrencies pegged to a specific asset like the US dollar, are on the verge of revolutionizing the $150 trillion payments industry, according to a Monday report from Bloomberg

The joint dashboard developed by Visa and Allium Labs aims to filter out transactions initiated by bots and large-scale traders in order to isolate those made by real individuals. 

Organic Payment Activity Accounts for a Portion of Stablecoin Volume

The data from April indicates that out of approximately $2.2 trillion in total transactions, only $149 billion can be attributed to “organic payments activity” conducted by genuine users.

The study’s results suggest that stablecoins are still in the early stages of their evolution as a payment instrument. 

“That’s not to say that they don’t have long-term potential because I think they do,” Pranav Sood, the executive general manager for EMEA at payments platform Airwallex, said. 

“But the short-term and the mid-term focus needs to be on making sure that existing rails work much better.”

@visa starting to get scared about the volume of transactions getting settled with #stablecoins.

I’m not surprised TBH – the stablecoin settlement volume now EXCEEDS that of Visa.
Why do we still need Visa when we can settle peer to peer?https://t.co/YwDKWrMgQa

— Jason Sarria-Solis (@Jsonsarriasolis) May 5, 2024

Accurately tracking the real value of crypto activity using blockchain data has always been a challenge. 

For instance, 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 Volume Faces Double-Counting Issue

Stablecoin transactions often face the issue of double-counting, depending on the platform to which users transfer funds. 

Cuy Sheffield, Visa’s head of crypto, told Bloomberg that converting $100 of Circle Internet Financial’s USDC to PayPal’s PYUSD on the decentralized exchange Uniswap would result in $200 of total stablecoin volume being recorded on-chain.

Visa, a company that handled over $12 trillion worth of transactions in 2020, is among the entities that could potentially lose out if stablecoins become widely accepted as a means of payment.

Analysts at Bernstein predicted 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.

In an effort to leverage stablecoins, 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.

The company is starting with USDC stablecoins on the Solana, Ethereum, and Polygon blockchains.

However, Airwallex has observed limited demand for stablecoin-based payment solutions from its customers, as many still do not perceive the technology as user-friendly enough, according to Sood. 

“It’s a really significant barrier to overcome,” he said. 

“It’s important to remember that in the US, people are still using checks to pay for somewhere between 40% and 60% of business payments, which gives you a sense of where the market really is in terms of technological adoption.”

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