According to a new metric developed jointly with Visa Inc., more than 90% of stablecoin transaction volumes do not come from real users, suggesting that such crypto tokens are still far from becoming a widely used means of payment.
The dashboard from Visa and Allium Labs is designed to isolate transactions initiated by bots and large traders, and isolate transactions made by real people. Of the roughly $2.2 trillion in total transaction volume in April, only $149 billion came from “organic payment activity,” according to Visa.
Visa’s findings challenge arguments by stablecoin advocates that tokens pegged to an asset like the dollar are poised to revolutionize the $150 trillion payments industry. PayPal Inc. and Stripe Inc. are among the fintech giants getting into stablecoins, with Stripe co-founder John Collison citing “technical improvements” for the bullish approach to the tokens in April.
Read more: Stripe Brings Crypto Payments Back to Stablecoin Platform
“This suggests that stablecoins are still in the infancy of their evolution as a payment instrument,” Pranav Sood, executive general manager for EMEA at payments platform Airwallex, said of the data. “That doesn’t mean they don’t have long-term potential, because I think they do. But in the short to medium term the focus needs to be on making the existing rails 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 float attributed to digital tokens at the peak of the 2021 bull market was actually closer to $875 billion.
With stablecoins, transactions can often be counted twice depending on which platform users transfer funds to. For example, converting 100 USD to Circle Internet Financial Ltd. USD. PayPal’s PYUSD on decentralized exchange Uniswap will result in $200 of the total stablecoin supply being recorded on-chain, said Kai Sheffield, head of cryptocurrency at Visa.
Visa itself, which processed more than $12 trillion in transactions last year, is among the companies that could suffer losses if stablecoins become a common means of payment.
The total value of all stablecoins in circulation could reach $2.8 trillion by 2028, Bernstein analysts predicted last year. That would be almost an 18-fold increase in their total circulation now. Because transactions using these tokens are instant and virtually free, many in the crypto industry argue that they are ideally suited to disrupt the payments sector.
PayPal launched launched the stablecoin PYUSD last year in search of a solution for instant and low-cost transfers within its broader payments infrastructure. On April 25, Stripe said it was allowing merchants using its platform to accept stablecoins for online transactions.
However, Sood said Airwallex is seeing moderate demand from its customers for stablecoin-based payment solutions as many still do not find the technology user-friendly enough.
“This is a really big 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 an idea of where the market really is in terms of technology adoption.”