Stablecoins Are Growing, And The Visa Report Proves It

Allium Partners
Allium Partners
May 16, 2024
3 min read
Stablecoins Are Growing, And The Visa Report Proves It

Table of contents

Originally written by Sean Stein Smith, Forbes.

With the rise in discussion and debate around stablecoins, including the most recent legislation introduced by Lummis-Gillibrand Payment Stablecoin-Act, as well as the record profits earned by Tether in Q1 2024, it was inevitable that this scrutiny would also unveil statistics and usage that would not be universally celebrated. In May 2024 a report issued by Visa and data platform Allium Labs documented that 90% of all stablecoin transactions are conducted by bots and other algorithmic processes, with only the remaining 10% of transactions originating from human activities. As would be expected this report set off a renewed round of debate and discussion regarding both the role of stablecoins in the cryptoasset space, as well as the potential systemic risk that these instruments might cause.

Let’s take a look at a few other statistics and market realities that add some much needed context to these inflammatory headlines.

Stablecoins Are Growing

Despite the findings and assumptions of this report, the issuing firms did acknowledge the facts that 1) the stablecoin market is growing with approximately 27.5 million active users, and 2) the growth in transaction volume from human activity reinforces the positive sentiment that has driving the entire crypto space forward in 2024. Other market indicators of the appeal of stablecoins to TradFi firms are the launch of stablecoin by PayPalthe Stripe partnership with Circle to relaunch crypto payments, and the initiatives launched by Visa to get into the tokenized payment space. With approximately $150 billion in volume driven by organic human activity, as determined by the report, these volumes are not something to be brushed aside, especially for an asset class that is still navigating such an uncertain regulatory landscape.

Metrics Are Not Perfect

Examining the methodology and criteria used in the report to arrive at the 90/10 split of transactions, there are a few interesting items that are worth further discussion. First, the fact that Visa and Allium excluded high frequency trading and institutional trading automatically eliminates many of the largest players and institutions that are most active in the stablecoin sector. Given the uncertain regulatory and (some would say) punitive tax treatment (every transaction creates taxes) that stablecoins and other crypto face, it is no surprise that institutions and high-frequency traders are leaders in the space.

Specifically the filter used to distinguish organic versus inorganic users counted transactions that originated from wallets that initiated under 1000 transactions that totaled less than $10 million. An additional finding that has been presented by Austin Campbell (former fund manager for Paxos BUSD), is that Visa might have also excluded wallets from centralized exchanges that hold stablecoins for usage in prepaid cards, some of which are issued by Visa.

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