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More than 90% of stablecoin transactions aren’t from real users, study finds

Bloomberg • 3 min read
More than 90% of stablecoin transactions aren’t from real users, study finds
Less than 10% of stablecoin transactions are “organic", but payments companies continue to expand into stablecoins. Photo: Bloomberg.
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More than 90% of stablecoin transaction volumes aren’t coming from genuine users, according to a new metric co-developed by Visa Inc., suggesting such crypto tokens may be far away from becoming a commonly used means of payment. 

The dashboard from Visa and Allium Labs is designed to strip out transactions initiated by bots and large-scale traders to isolate those made by real people. Out of about US$2.2 trillion ($2.97 trillion) in total transactions in April, just US$149 billion originated from “organic payments activity,” according to Visa. 

Visa’s finding challenges stablecoin proponents’ argument that the tokens, pegged to an asset like the dollar, are poised to revolutionize the US$150 trillion payments industry. PayPal Inc. and Stripe Inc. are among the fintech giants making inroads into stablecoins, with Stripe co-founder John Collison in April citing “technical improvements” for being bullish on the tokens. 

“It says that stablecoins are still in a very nascent moment in their evolution as a payment instrument,” Pranav Sood, executive general manager for EMEA at payments platform Airwallex, said of the data. “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.”

Tracking the “real” value of crypto activity using blockchain data has always been a challenge. Data provider Glassnode has estimated that the record US$3 trillion of total market circulation assigned to digital tokens at the peak of the 2021 bull market was actually closer to US$875 billion. 

With stablecoins, transactions can often be double-counted depending on the platform users are transferring funds to. For example, converting US$100 of Circle Internet Financial Ltd.’s USDC to PayPal’s PYUSD on the decentralized exchange Uniswap would result in US$200 of total stablecoin volume being recorded on-chain, said Cuy Sheffield, Visa’s head of crypto.

See also: Bitcoin developers are touting ‘programmability’ as the catalyst for the next rally

Visa itself, which handled more than US$12 trillion worth of transactions last year, is among companies that could stand to lose out should stablecoins become a generally accepted means of payment. 

The total value of all stablecoins in circulation could reach US$2.8 trillion by 2028, analysts at Bernstein predicted last year. That would be an almost 18-fold increase from their combined circulation now. Because transactions using such tokens are instantaneous and almost without cost, many in the crypto industry argue that they’re perfectly suited for disrupting the payments sector. 

PayPal launched its PYUSD stablecoin last year, seeking a solution for instant and lower-cost transfers within its wider payment infrastructure. Stripe said on April 25 it’s allowing merchants using its platform to accept stablecoins for online transactions. 

See also: Online casino guide platform finds Singapore ninth-most 'crypto-friendly' country globally

Even so, Airwallex has seen tepid demand from its customers for stablecoin-based payments solutions as many still don’t regard 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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