Over 90% of Stablecoin Transactions Not Genuine

The stablecoin sector is not a stranger to controversies, but a recent study questions whether these assets are being widely used as claimed.

According to the report, a new metric developed by American multinational payment giant Visa indicates that over 90% of stablecoin transactions aren’t made by genuine users, suggesting that these cryptocurrencies are far from being widely adopted for payments.

Only 10% of Stablecoin Transactions Organic

Visa, along with Allium Labs, has created a dashboard to filter out transactions initiated by bots and large-scale traders, focusing only on those made by real people. Out of $2.2 trillion in total transactions in April, only $149 billion were from “organic payments activity,” according to Visa.

That essentially means that less than 10% of stablecoin transaction volumes actually originate from genuine users or are considered organic. The dashboard reads,

“This adjusted metric aims to remove potential distortions that can arise from inorganic activity and other artificial inflationary practices.”

The dashboard employs two important filters. Single directional volume filter and inorganic user filter.

A single-directional volume filter only counts the largest stablecoin amount transferred within a single transaction and eliminates redundant internal transactions in complex smart contract interactions.

Meanwhile, the inorganic user filters consider 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 from accounts exceeding these thresholds are disregarded to eliminate various bot activities as well as automatic transactions from large entities like centralized exchanges.

Stablecoin Market Still in Nascent Stage?

Pranav Sood, executive general manager for EMEA at Airwallex, commented that the data suggests stablecoins are still in an early phase of development as a payment method. While acknowledging the long-term potential of the assets, the exec stressed the need to focus on improving existing payment systems in the short and mid-term.

Prominent blockchain intelligence firm Glassnode had earlier estimated that the $3 trillion market circulation during the peak of the 2021 bull market was actually closer to $875 billion.

With stablecoins, transactions can be double-counted depending on the platform used. For instance, converting $100 of Circle’s USDC to PayPal’s PYUSD on Uniswap would result in $200 of recorded stablecoin volume. Visa itself, having handled over $12 trillion worth of transactions last year, could face losses if stablecoins become widely accepted.

As such, experts predict that the total value of all stablecoins in circulation could reach $2.8 trillion by 2028, which would be an almost 18-fold increase from their current circulation. Many in the crypto industry argue that stablecoins, due to their instantaneous and low-cost transactions, are perfectly suited for disrupting the payments sector.

PayPal introduced its PYUSD stablecoin last year to enable instant and lower-cost transfers within its payment infrastructure. Stripe announced on April 25 that it’s allowing merchants on its platform to accept stablecoins for online transactions.