A recent report from Bloomberg revealed that more than 90% of stablecoin transaction volumes do not come from real users, according to a new metric co-developed by Visa.
Stablecoin market faces data reality
Visa and Allium Labs have developed a dashboard designed to filter out transactions initiated by bots and high-volume merchants and isolate transactions from real individuals. Of the approximately $2.2 trillion in total transactions In April, only $149 billion was identified by Visa as “organic payment activity.”
The facts challenges the optimistic view of stablecoin proponents who believe these tokens can transform the $150 trillion payments industry.
Fintech giants such as PayPal Inc. and Stripe Inc. have been exploring stablecoins, with Stripe co-founder John Collison expressing optimism about the tokens due to “technical improvements.”
Pranav Sood, the executive general manager for EMEA at payments platform Airwallex, commented on the findings: “It says stablecoins are still at a very nascent point in their evolution as a payment instrument.”
Sood emphasized the need to focus on expanding what already exists payment infrastructure in the short and medium term, while recognizing the long-term potential of stablecoins.
Accurately tracking the “real” value of crypto activities using blockchain data has always been a challenge. Glassnode, a data provider, estimates that the record $3 trillion allocated to digital tokens at the peak of the bull market in 2021 was closer to $875 billion.
Analysts predict a huge increase
According to Bloomberg, the nature of stablecoin transactions often leads to double counting depending on the platform users use for money transfers. For example, if you convert $100 from Circle’s USDC stablecoin to PayPal’s PYUSD on the decentralized exchange (DEX) Uniswap would result in $200 in total stablecoin volume being recorded on-chain.
Visa, which processed more than $12 trillion last year, could suffer if stablecoins gain widespread acceptance as a means of payment.
Interestingly, despite this troubling data, Bernstein analysts predicted that the total value of all stablecoins in circulation could reach $2.8 trillion by 2028, almost 18 times the current combined circulation.
While PayPal and Stripe have made progress in adopting stablecoins, Airwallex has seen limited demand for stablecoin-based payment solutions among its customers, mainly due to “user-friendliness” concerns.
Sood highlighted the significant barrier of overcoming entrenched payment methods, citing the continued use of checks for 40% to 60% of business payments in the United States.
The Bloomberg report sheds light on the dominance of insincere user activity in stablecoin transactions. The study underlines the importance of improving existing payment infrastructure and addressing user-friendly issues to unlock the long-term potential of stablecoins.
Featured image from Shutterstock, chart from TradingView.com
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