Visa Faces Stablecoins’ Challenge as Dominant Mode of Payment
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Stablecoins to Surpass Visa in Payment Volume – Sacra
The battle for dominance in payment volumes intensifies as stablecoins emerge as formidable contenders against traditional giants like Visa. Research firm Sacra forecasts a game-changer: stablecoins could surpass Visa’s payment volume by the end of the second quarter of 2024.
Sacra’s co-founder, Jan-Erik Asplund, attributes stablecoins’ growing prominence to their unparalleled fit for cross-border money movement. Asplund highlights the advantages of convenience, speed, and cost-effectiveness over traditional methods.
According to Sacra’s projections, stablecoin transactions could soar past $4 trillion, fueled by widespread adoption and endorsement from major banks. However, Visa’s head of crypto, Cuy Sheffield, expressed his doubts about Sacra’s forecast.
Sheffield argues that stablecoin data is clouded by noise, with many transactions driven by bots and automated programs. Visa’s recently launched dashboard reveals that up to 90% of stablecoin transactions over the past month may not be genuine user interactions.
This discrepancy raises concerns about the accuracy of measuring stablecoin volumes and their comparison to traditional payment networks like Visa. Visa’s dashboard, developed in collaboration with Allium Labs, introduces various metrics to filter out inorganic activities and artificial inflationary practices. Thus, Visa can have a clearer picture of stablecoin transaction volumes.Â
Stablecoin Market Receives New EntrantsÂ
The stablecoin market’s rapid expansion has drawn attention from other industry players. PayPal entered the fray with its PYUSD stablecoin launch in 2023, signaling its commitment to integrating cryptocurrencies into its platform.
Similarly, Stripe announced plans to enable merchants to accept stablecoin payments for online transactions. In April, Ripple, a prominent player in the crypto space, announced its intentions to launch a United States dollar-backed stablecoin, adding to the competition among stablecoin issuers. The stablecoin market boasts a total market capitalization of approximately $161 billion, with a daily trading volume of $37 billion, according to the latest CoinGecko data.
Less Than 10% of Stablecoin Transactions Stem from Genuine Users – Study
Meanwhile, an analysis co-developed by Visa and data platform Allium Labs revealed that less than 10% of stablecoin transaction volumes originate from real users. The report underscores a profound imbalance in the stablecoin ecosystem.
Out of $2.2 trillion in total transactions recorded in April, $149 billion could be traced back to “organic payments activity” by the study. This sharp contrast paints a stark picture of the dominance of non-human entities in the stablecoin market.
Stablecoins, such as Tether (USDT) and USD Coin (USDC), have long been heralded for their role in providing stability within the volatile cryptocurrency space. However, the recent analysis casts doubts on the percentage of genuine users that utilize these digital assets for their intended purpose.
The results, though startling, provide valuable insights into the dynamics of the stablecoin market. Despite the overwhelming presence of non-human actors, the analysis also revealed a steady growth in monthly active stablecoin users. With 27.5 million monthly active users across all chains, the broader adoption of stablecoins is high.
A Crackdown on Stablecoins Issuers
Despite the growing enthusiasm for stablecoins, some regulators are scrutinizing stablecoin issuers to mitigate risks associated with money laundering and financial instability. In January, a UNODC report highlighted how crypto scammers use stablecoins to siphon and illegally store funds.
In China, where cryptocurrency trading is prohibited, the Supreme People’s Procuratorate cautioned against using USDT in December. Meanwhile, US lawmakers proposed a bill in November to prevent government officials from engaging in transactions with Tether’s parent company, iFinex.
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