More than 90% of stablecoin trading volume does not come from real users, according to a new metric co-developed by Visa Inc., suggesting that such crypto tokens may be far away from becoming a commonly used payment method.
Visa and Allium Labs’ dashboards are designed to weed out trades initiated by bots and large traders to isolate trades made by real people. Visa said that of the roughly $2.2 trillion in total transactions in April, only $149 billion came from “organic payment activity.”
Visa’s findings challenge the view of stablecoin proponents that tokens pegged to assets such as the U.S. dollar have the potential to revolutionize the $150 trillion payments industry. PayPal Inc. and Stripe Inc. are among the financial technology giants entering the stablecoin field. Stripe co-founder John Collison expressed optimism about these tokens in April, calling them “technological improvements.”
Read More: Stripe Restores Crypto Payments on Platform via Stablecoin
Pranav Sood, executive general manager for Europe, the Middle East and Africa at payments platform Airwallex, said of the data: “This shows that the development of stablecoins as payment tools is still in a very early stage.” “This is not to say that they do not have long-term potential, Because I think they have. But the short and medium term focus needs to be on making sure the existing railways work better.
Tracking the “true” value of cryptocurrency activity using blockchain data has always been a challenge. Data provider Glassnode estimates that at the peak of the bull market in 2021, the total market circulation of digital tokens reached a record $3 trillion, which was actually close to $875 billion.
With stablecoins, transactions can often be double-counted, depending on the platform the user is transferring funds to. Cuy Sheffield, head of cryptocurrency at Visa, said that converting $100 of Circle Internet Financial Ltd.’s USDC to PayPal’s PYUSD on decentralized exchange Uniswap, for example, would result in $200 of total stablecoin transaction volume being recorded on the chain.
Visa itself processed more than $12 trillion worth of transactions last year, and the company could suffer if stablecoins become a commonly accepted payment method.
Bernstein analysts predicted last year that the total value of all stablecoins in circulation could reach $2.8 trillion by 2028. This would be an increase of nearly 18 times from the current combined circulation. Because transactions using such tokens are instant and virtually cost-free, many in the crypto industry believe they are well-suited to disrupting the payments industry.
PayPal launched the PYUSD stablecoin last year, seeking a solution to enable instant and low-cost transfers within its broader payments infrastructure. Stripe said on April 25 that it allows merchants to use its platform to accept stablecoins for online transactions.
Even so, Sood said Airwallex has seen tepid customer demand for stablecoin-based payment solutions, as many still believe the technology is not user-friendly enough.
“That’s really a significant hurdle to overcome,” he said. “It’s important to remember that in the U.S., people still use checks for 40 to 60 percent of business payments, which gives you an idea of what the market is really like in terms of technology adoption.”
