More than 90% of stable trading volumes do not come from genuine users, according to a new metric co-developed by Visa Inc., suggesting that these crypto tokens may be far from becoming a commonly used payment method.
Visa and Allium Labs’ dashboard is designed to remove trades initiated by bots and traders at scale to isolate those made by real people. Of approximately $2.2 trillion in total transactions in April, only $149 billion came from “organic payments activity,” according to Visa.
Visa’s findings call into question stablecoin proponents’ argument that the tokens, pegged to an asset like the dollar, are poised to revolutionize the $150 trillion payments industry. PayPal Inc. and Band Inc. are among the fintech giants making forays into stablecoins, with Stripe co-founder John Collison in April citing “technical improvements” to be bullish on the tokens.
Learn more: Stripe brings crypto payments back to the platform with Stablecoins
“This indicates that stablecoins are still in their early stages in their evolution as a payment instrument,” Pranav Sood, executive general manager for EMEA at payment platform Airwallex, said of the data. “That’s not to say they don’t have long-term potential, because I think they do. But in the short and medium term, we must ensure that the existing rails work much better. »
Tracking the “true” value of crypto activity using blockchain data has always been a challenge. Data provider Glassnode estimated that the record $3 trillion in total market circulation attributed to digital tokens at the height of the 2021 bull market was actually closer to $875 billion.
With stablecoins, transactions can often be counted twice depending on the platform users transfer funds to. For example, Circle Internet Financial Ltd.’s $100 USDC conversion. in PYUSD from PayPal on decentralized exchange Uniswap would result in $200 of total stablecoin volume being recorded on-chain, said Cuy Sheffield, head of crypto at Visa.
Visa itself, which processed more than $12 trillion in transactions last year, is among the companies that could lose out if stablecoins become a generally accepted payment method.
The total value of all stablecoins in circulation could reach $2.8 trillion by 2028, Bernstein analysts predicted last year. This would represent a nearly 18-fold increase over their current combined distribution. Since transactions using such tokens are instant and almost free, many in the crypto industry say they are ideally suited to disrupt the payments industry.
PayPal spear its stablecoin PYUSD last year, seeking a solution for instant, lower-cost transfers within its broader payments infrastructure. Stripe said on April 25 that it was allowing merchants using its platform to accept stablecoins for online transactions.
Despite this, Airwallex has seen lukewarm demand from its customers for stablecoin-based payment solutions, as many still do not view the technology as user-friendly enough, according to Sood.
“It’s a really big hurdle to overcome,” he said. “It’s important to remember that in the United States, people still use checks to pay between 40% and 60% of business payments, which gives you an idea of where the market really is in terms of technology adoption .”
