A groundbreaking study co-developed by Visa Inc. and Allium Labs has unveiled a startling revelation: more than 90% of stablecoin transaction volumes may not originate from genuine users, casting doubt on the widespread adoption of these cryptocurrencies as a mainstream means of payment.
The innovative dashboard, meticulously designed by Visa and Allium Labs, aims to dissect transactions initiated by bots and large-scale traders, thereby isolating those conducted by authentic individuals. Shockingly, out of the staggering $2.2 trillion in total transactions recorded in April, a mere $149 billion was attributed to “organic payments activity,” as per Visa’s findings.
This revelation challenges the optimistic narrative put forth by stablecoin advocates, who assert that these tokens, pegged to assets like the dollar, are poised to revolutionize the $150 trillion payments industry. Industry giants such as Paypal Inc. and Stripe Inc. have made strides in embracing stablecoins, with Stripe cofounder John Collison citing “technical improvements” as a reason for his bullish outlook on the tokens.
Pranav Sood, executive general manager for EMEA at payments platform Airwallex, commented on the data, stating, “It says that stablecoins are still in a very nascent moment in their evolution as a payment instrument. That’s not to say that they don’t have long-term potential, because I think they do.”
However, the study underscores the pressing need to enhance existing payment infrastructure. Tracking the true value of crypto activity using blockchain data has always posed challenges. Data provider Glassnode previously estimated that the record $3 trillion attributed to digital tokens during the 2021 bull market was actually closer to $875 billion.
Stablecoin transactions often face issues of double-counting, depending on the platforms involved in fund transfers. Cuy Sheffield, Visa’s head of crypto, explained that converting $100 of Circle Internet Financial Ltd.’s USDC to Paypal’s PYUSD on a decentralized exchange like Uniswap could result in $200 of total stablecoin volume being recorded on-chain.
Despite the potential of stablecoins to disrupt the payments sector due to their instantaneous and low-cost nature, genuine user demand remains lukewarm. Pranav Sood of Airwallex highlighted the significant hurdle of user-friendliness, emphasizing that many customers still perceive stablecoin technology as complex.
As the study sheds light on the current landscape, it prompts industry players to reevaluate their strategies and focus on overcoming barriers to adoption. While stablecoins hold promise for the future, their widespread acceptance hinges on addressing existing challenges and enhancing user experience in the evolving digital payments landscape.