According to a brand new metric co-developed by Visa Inc., greater than 90% of stablecoin transaction volume doesn’t come from real users, suggesting that such crypto tokens should be removed from becoming a commonly used technique of payment.
Visa and Allium Labs’ dashboard is designed to filter out transactions initiated by bots and wholesalers to isolate transactions made by real people. Of the roughly $2.2 trillion in total transactions in April, only $149 billion got here from “organic payment activity,” in line with Visa.
Visa’s finding challenges stablecoin proponents’ argument that the tokens, pegged to an asset just like the dollar, will revolutionize the $150 trillion payments industry. PayPal Inc. and Stripe Inc. are among the many fintech giants making forays into stablecoins, with Stripe co-founder John Collison in April citing “technical improvements” as bullish on the tokens.
Read more: Stripe is bringing crypto payments back to the platform with stablecoins
“It is said that stablecoins are still at a very early stage in their development as a payment instrument,” Pranav Sood, executive general manager for EMEA at payments platform Airwallex, said of the info. “That doesn’t mean they don’t have long-term potential, because I think that’s the case. But the short and medium term focus needs to be on ensuring the existing tracks work much better.”
Tracking the “true” value of crypto activity using blockchain data has all the time been a challenge. Data provider Glassnode has estimated that the record $3 trillion of total digital token market supply 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 to which users are transferring funds. For example, converting $100 of USDC from Circle Internet Financial Ltd. in PYUSD from PayPal on the decentralized exchange Uniswap would end in $200 of the entire stablecoin volume being captured on-chain, said Cuy Sheffield, head of crypto at Visa.
Visa itself, which processed greater than $12 trillion in transactions last yr, is amongst the businesses that would suffer losses if stablecoins develop into a widely accepted technique of payment.
The total value of all stablecoins in circulation could reach $2.8 trillion by 2028, analysts at Bernstein predicted last yr. That could be an almost 18-fold increase over the present total circulation. Because transactions with such tokens are fast and nearly free, many within the crypto industry argue that they’re perfect to revolutionize the payments sector.
PayPal began launched its PYUSD stablecoin last yr and was on the lookout for an answer for immediate and lower-cost transfers inside its broader payments infrastructure. Stripe announced on April 25 that it was allowing merchants using its platform to just accept stablecoins for online transactions.
However, in line with Sood, Airwallex is seeing subdued demand from its customers for stablecoin-based payment solutions as many still don’t consider the technology to be user-friendly enough.
“It’s a really big hurdle to overcome,” he said. “It is important to remember that in the United States, between 40% and 60% of business payments are still made with checks. That gives you a sense of where the market really is in terms of technology adoption.”
