Visa and Allium Labs Reveal 90% of Stablecoin Transactions Aren’t Genuine Users

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Recently, leading financial services corporation, Visa, in partnership with Allium Labs, revealed through a pioneering analytic tool, that more than 90% of stablecoin transaction volumes are not derived from genuine users. Instead, these transactions are initiated by bots or large-scale trade activities. The tool was designed to sieve real transactions from the mass, and its analysis painted a very different picture of the stablecoin market.

In a month replete with approximately $2.2 trillion total recorded transactions, a meagre sum of $149 billion was demarcated as bona fide payments activity. This illuminating data disillusions the buoyant future touted by stablecoin advocates who harbored grand visions of a $150 trillion payments industry remodeled by stablecoin tokens.

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Financial technology heavyweights, including PayPal Inc. and Stripe Inc., are delving deeper into the stablecoin domain. Stripe’s co-founder, John Collison, manifests a particularly optimistic enthusiasm for stablecoin tokens, driven by their significant technical advancements.

Reflecting on these new insights, Pranav Sood, the Executive General Manager for EMEA at renowned payments platform Airwallex, shared: “This lays bare the reality that stablecoins are still in a fledgling phase in their evolution as a viable payment instrument.” Sood underlined the necessity for enhancing existing payment infrastructure in the foreseeable future, yet echoed the sentiments of long-term potential for stablecoins.

However, a hurdle clearly exists in discerning the true value of crypto activity from blockchain data. Glassnode, a prominent data provider, surmised that the nosebleed valuation of $3 trillion associated with digital tokens at the peak of the bull market in 2021, was indeed more akin to $875 billion.

Similarly, the intrinsic nature of stablecoin transactions, according to Bloomberg, often results in skewed data and double-counting, contingent on the platform selected for fund transfers. One such instance would be converting $100 of Circle’s USDC stablecoin to PayPal’s PYUSD on the decentralized exchange (DEX) Uniswap. This conversion would, paradoxically, yield a total stablecoin volume of $200 documented on-chain.

A future where stablecoins are universally accepted as payment could potentially hit Visa, which successfully processed over $12 trillion in transactions the preceding year.

Nonetheless, analysts at Bernstein provide a glimmer of hope, anticipating a surge in the total value of all stablecoins in circulation to an estimated $2.8 trillion by 2028. This would be a staggering growth of nearly 18 times their current cumulative circulation.

While PayPal and Stripe make strides towards incorporating stablecoins, Airwallex has encountered limited demand for stablecoin-based payment solutions among its customers, who harbor apprehensions about the perceived user-friendliness of the system.

In the United States alone, traditional payment methods, like checks, are still preferred for a substantial 40% to 60% of business transactions, reminding us that innovation must overcome tradition.

The Bloomberg report sheds an unforgiving light on the prevalence of artificial user activity plaguing stablecoin transaction volumes. The revelation underscores the significance of augmenting existing payment infrastructure, and tackling user-friendly concerns to ultimately tap into the prodigious long-term potential of stablecoins.