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Nearly all stablecoin transactions come from bots and large-scale traders, the study says
According to a new parameter developed jointly by Visa Inc., suggesting that such crypto tokens may be far from becoming a commonly used means of payment.
Visa and Allium Labs’ dashboard is designed to weed out transactions initiated by bots and large-scale traders to isolate those made by real people. According to Visa, out of approximately $2.2 trillion in total transactions in April, only $149 billion came from “organic payments activity.”
Visa’s discovery calls into question stablecoin advocates’ contention that the tokens, pegged to an asset like the dollar, are poised to revolutionize the $150 trillion payments industry. PayPal Inc. e Band 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.
To know more: Stripe brings crypto payments back to the platform with stablecoins
“Stablecoins are said to still be in a nascent stage of 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 they don’t have long-term potential, because I think they do. But the short and medium term focus must be on ensuring that existing railways perform much better.”
Tracking the “real” value of crypto activity using blockchain data has always been a challenge. Data provider Glassnode estimated that the record $3 trillion in total market circulation allocated to digital tokens at the height of the 2021 bull market was actually closer to $875 billion.
With stablecoins, transactions can often be double-counted depending on the platform users transfer funds to. For example, converting $100 of Circle Internet Financial Ltd.’s USDC to PayPal’s PYUSD on the decentralized exchange Uniswap would result in a total volume of $200 worth of stablecoins being posted on the chain, said Cuy Sheffield, Visa’s head of cryptocurrencies .
Visa itself, which handled transactions worth more than $12 trillion last year, is among the companies that could lose if stablecoins become a generally accepted means of payment.
The total value of all stablecoins in circulation could reach $2.8 trillion by 2028, analysts at Bernstein predicted last year. This would represent a nearly 18-fold increase over their current combined circulation. Because transactions using such tokens are instant and nearly cost-free, many in the cryptocurrency industry argue that they are perfectly suited to revolutionize the payments industry.
PayPal launched its PYUSD stablecoin last year, seeking a solution for instant, low-cost transfers within its broader payments infrastructure. Stripe said on April 25 that it will allow merchants using its platform to accept stablecoins for online transactions.
Nonetheless, Airwallex has seen weak demand from its customers for stablecoin-based payment solutions as many still do not consider the technology 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 still use checks to pay between 40% and 60% of business payments, which gives you a sense of where the market really is in terms of technology adoption.”