A new metric co-developed by Visa Inc. has raised questions about the real-world adoption of stablecoins, suggesting that more than 90% of their transaction volumes aren't originating from genuine users. The study, conducted in collaboration with Allium Labs, is designed to filter out transactions initiated by bots and large-scale traders, isolating those made by real people.
According to Visa's findings, out of the approximately $2.2 trillion in total stablecoin transactions recorded in April, only $149 billion could be attributed to "organic payments activity" made by actual users.
Challenging the Stablecoin Revolution Narrative
These findings challenge the argument put forth by stablecoin proponents that these crypto tokens, pegged to assets like the US dollar, are poised to revolutionize the $150 trillion payments industry.
Major fintech companies like PayPal Inc. and Stripe Inc. have been making inroads into stablecoins, with Stripe co-founder John Collison citing "technical improvements" as the reason for his bullishness on the tokens.
Pranav Sood, Executive General Manager for EMEA at Airwallex, a payments platform, commented on Visa's data suggesting that stablecoins, while having long-term potential as a payment instrument, are still in a very nascent stage of evolution, and the short-term and mid-term focus should be on improving existing payment rails before stablecoins can become widely adopted.
That’s not to say that they don’t have long-term potential, because I think they do. But the short-term and the mid-term focus needs to be on making sure that existing rails work much better.
Pranav Sood
Tracking Real Crypto Activity: A Persistent Challenge
Accurately tracking the "real" value of crypto activity using blockchain data has always been a challenge. Data provider Glassnode has estimated that the record $3 trillion of total market circulation assigned to digital tokens at the peak of the 2021 bull market was actually closer to $875 billion.
Furthermore, Cuy Sheffield, Visa's head of crypto, explained that with stablecoins, transactions can often be double-counted depending on the platform users are transferring funds to, inflating the recorded volume.
Disrupting the Payments Industry: A Long Road Ahead
While analysts at Bernstein predicted that the total value of all stablecoins in circulation could reach $2.8 trillion by 2028, a nearly 18-fold increase from their current levels, the industry still faces significant challenges in terms of user adoption and technological acceptance.
Moreover, Sood highlighted the tepid demand from Airwallex's customers for stablecoin-based payments solutions, citing the technology's perceived lack of user-friendliness as a significant barrier to overcome.
He noted that in the US, people still use checks for between 40% and 60% of business payments, which underscores the market's reluctance to adopt new technological solutions.
While stablecoins have been touted as a potential disruptor in the payments sector due to their instantaneous and low-cost transactions, Visa's study suggests that their real-world adoption and usage may still be far from the levels predicted by industry enthusiasts.
The Future of Stablecoins: Regulation and Adoption
While the potential of stablecoins remains promising in the long term, industry experts emphasize the need to focus on improving existing payment infrastructure before widespread adoption can occur.
Additionally, accurately tracking real crypto activity continues to be a persistent challenge, with discrepancies in reported transaction volumes and potential double-counting complicating the assessment of stablecoin usage.
However, in order to foster a prosperous and sustainable future for the burgeoning stablecoin sector, it is crucial that key players - including fintech companies, regulators, and industry experts - collaborate to mitigate risks, safeguard consumers, and promote ethical innovation in this rapidly advancing field.
Looking ahead, the stablecoin sector faces hurdles in terms of technological acceptance and user adoption. The future of stablecoins as a payment solution remains uncertain but holds great promise due to increasing involvement and financial commitment from fintech firms and regulatory bodies alike.