Stablecoins: Far From Mainstream, Most Transactions Driven by Bots and Whales

A new metric co-developed by Visa and Allium Labs reveals that over 90% of stablecoin transaction volumes originate from bots or large-scale traders rather than genuine users. This finding challenges the argument that stablecoins, often pegged to assets like the dollar, are poised to revolutionize the payments industry, despite fintech giants like PayPal and Stripe investing in their development.

Stablecoins: Far from Widespread Adoption, Majority of Transactions Originate from Bots and Large-Scale Traders

Visa and Allium Labs' New Dashboard Reveals Shocking Insight on Stablecoin Usage

In a bombshell revelation that challenges the narrative surrounding stablecoins, a new metric co-developed by Visa Inc. and Allium Labs has exposed a startling truth: over 90% of stablecoin transaction volumes do not originate from genuine users. This groundbreaking finding suggests that stablecoins, once touted as the future of payments, may be far from becoming a commonly used means of exchange.

The dashboard, meticulously designed to isolate transactions made by real people by eliminating those initiated by bots and large-scale traders, paints a sobering picture of stablecoin adoption. Out of a staggering $2.2 trillion in total transactions recorded in April, a mere $149 billion were classified as "organic payments activity," according to Visa.

Visa's Findings Counter the Optimism of Stablecoin Proponents

Visa's discovery casts a shadow over the enthusiastic proclamations made by stablecoin advocates, who posit that these tokens, pegged to assets like the dollar, hold the potential to revolutionize the payments industry, valued at $150 trillion annually. Fintech giants such as PayPal Inc. and Stripe Inc. have been actively investing in stablecoins, with Stripe co-founder John Collison bullishly citing "technical improvements" as a reason for their optimism about the tokens.

Reality Check: Stablecoins Still in Early Stages of Evolution

"This data is a clear indication that stablecoins are still in a very nascent stage of their evolution as a payment instrument," declared Pranav Sood, executive general manager for EMEA at payments platform Airwallex, commenting on the findings. "This is not to say that they lack long-term potential, but the immediate and mid-term focus must be on ensuring that existing rails function more efficiently."

The Challenges of Measuring True Crypto Activity

Tracking the "real" value of crypto activity using blockchain data has always been an enigmatic task. Data provider Glassnode estimated that the record $3 trillion of total market circulation assigned to digital tokens at the peak of the 2021 bull market was, in reality, closer to $875 billion.

With stablecoins, the problem of double-counting transactions arises due to the involvement of multiple platforms during fund transfers. For instance, converting $100 of Circle Internet Financial Ltd.'s USDC to PayPal's PYUSD on the decentralized exchange Uniswap would result in $200 of total stablecoin volume being recorded on-chain, explained Cuy Sheffield, Visa's head of crypto.

Visa's Potential Loss as Stablecoins Gain Traction

Visa itself, which processed over $12 trillion worth of transactions in the past year, is among the companies that could face financial repercussions should stablecoins become a widely accepted means of payment.

Analysts' Predictions and Industry Response

Analysts at Bernstein projected that the total value of all stablecoins in circulation could reach $2.8 trillion by 2028, representing an almost 18-fold increase from their current combined circulation. Advocates of stablecoins emphasize their suitability for disrupting the payments sector due to their instantaneous transactions and virtually zero transaction costs.

PayPal launched its PYUSD stablecoin last year, seeking an innovative solution for instant and lower-cost transfers within its expansive payment infrastructure. Similarly, Stripe announced on April 25 that it would allow merchants using its platform to accept stablecoins for online transactions.

Despite the enthusiasm, Airwallex, a payment platform, has witnessed lukewarm demand for stablecoin-based payments solutions from its customers. Sood attributes this to the lack of user-friendliness perceived in the technology.

"Overcoming this barrier is crucial," Sood emphasized. "It's worth noting that in the U.S., checks are still widely used for 40% to 60% of business payments, which illustrates the current level of technological adoption in the market."

Conclusion: A Sobering Reminder of the Challenges Facing Stablecoins

The revelation that the majority of stablecoin transactions do not originate from genuine users serves as a sobering reminder of the challenges confronting stablecoins. While the tokens may hold long-term potential, their widespread adoption remains a distant prospect as the industry grapples with issues such as user-friendliness, double-counting of transactions, and the need for more efficient existing payment rails.