Visa's New Data Casts Doubt on Stablecoin Adoption as Only 10% of Transactions Deemed Genuine

Stablecoins, cryptocurrencies pegged to fiat currencies, have been questioned regarding their widespread usage. A recent Visa metric suggests that over 90% of stablecoin transactions are not genuine, indicating the nascent stage of the stablecoin market. Despite the potential for stablecoins to disrupt the payments sector, experts emphasize the need to improve existing systems in the short term.

New Visa Metric Casts Doubt on Widespread Adoption of Stablecoins

A recent study by Visa, the American multinational payment giant, has sparked concerns about the actual usage of stablecoins as a method of payment. According to the study, only 10% of stablecoin transactions are deemed genuine, indicating that the sector may be overstating its utility.

Visa collaborated with Allium Labs to develop a dashboard that filters out transactions initiated by bots and large-scale traders, focusing exclusively on those made by real people. The dashboard revealed that out of the total $2.2 trillion in stablecoin transactions in April, only $149 billion were classified as "organic payments activity."

This metric suggests that the overwhelming majority of stablecoin transactions (over 90%) originate from non-genuine users or are influenced by artificial inflationary practices. The dashboard employs two key filters:

• Single-Directional Volume Filter: This filter counts only the largest stablecoin amount transferred within a single transaction and eliminates redundant internal transactions in complex smart contract interactions.
• Inorganic User Filter: This filter considers transactions sent by accounts that have initiated less than 1,000 stablecoin transactions and have transferred less than $10 million in volume over the last 30 days. Transactions exceeding these thresholds are disregarded to eliminate bot activities and automatic transactions from large entities like centralized exchanges.

Experts believe that the data suggests that stablecoins are still in their early stages of development as a payment method. Pranav Sood, executive general manager for EMEA at Airwallex, emphasized the need to focus on improving existing payment systems in the short and mid-term, while acknowledging the long-term potential of stablecoins.

Another study by prominent blockchain intelligence firm Glassnode estimated that the $3 trillion market circulation of stablecoins during the peak of the 2021 bull market was actually closer to $875 billion. This discrepancy arises from the fact that stablecoin transactions can be double-counted depending on the platform used. For example, converting $100 of Circle's USDC to PayPal's PYUSD on Uniswap would result in $200 of recorded stablecoin volume.

As stablecoins gain wider acceptance, they pose a potential threat to Visa, which handled over $12 trillion worth of transactions last year. Experts predict 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 circulation.

Despite these concerns, the crypto industry maintains that stablecoins are ideally suited for disrupting the payments sector due to their instantaneous and low-cost transactions. PayPal introduced its PYUSD stablecoin last year for this purpose, and Stripe recently announced that it would allow merchants to accept stablecoins for online transactions.

The Visa study raises important questions about the true extent of stablecoin usage and its implications for the payments industry. Further research and analysis are needed to fully understand the potential of stablecoins and their role in the evolving financial landscape.