A recent collaboration between Visa and Allium Labs has shed new light on the stablecoin ecosystem, revealing that a significant portion of the activity attributed to these digital assets may not be as organic as previously thought. And that raises the question of whether stablecoins do have real-world applications.

The study focused on understanding the true nature of stablecoin transactions and found that bots and large-scale traders are the primary drivers of the $2.2 trillion market, with genuine organic payments activity accounting for only $149 billion in April.

The Illusion of Volume

The revelation that USDC has outpaced Tether's USDT in transaction volume, coupled with stablecoin activity surpassing Visa's monthly average, puts into perspective the burgeoning role of stablecoins in the financial landscape.

However, Visa's research challenges the notion that stablecoins are revolutionizing payments, suggesting their adoption as a payment instrument is still embryonic.

Despite interest from fintech giants like PayPal and Stripe, stablecoins have yet to significantly impact the $150 trillion payments sector.

"[...] stablecoins are still in a very nascent moment in their evolution as a payment instrument," says Pranav Sood from Airwallex.

Understanding the Data

The study also highlighted the issue of double-counting in stablecoin transactions, a phenomenon that inflates perceived volumes and complicates the tracking of genuine transactions.

For example, converting $100 of Circle USDC to PayPal's PYUSD on Uniswap counts as $200 of total stablecoin volume, obscuring the true extent of organic activity.

This issue, alongside the dominance of Tether's USDT and the growing valuation of the stablecoin market, underscores the complexities of the digital asset world and the challenges in measuring its actual impact on traditional finance.

Visa's Methodological Approach

Visa's innovative dashboard, which filters out inorganic stablecoin transactions, represents a significant step toward understanding the real utility of these digital tokens.

By isolating transactions that resemble peer-to-peer payments and excluding bot-driven activity, Visa seeks to provide a clearer picture of how stablecoins are used in genuine financial transactions. This approach, while not without its critics, offers a new perspective on the potential and limitations of stablecoins in facilitating everyday payments.

Looking Ahead

As the stablecoin market continues to grow, with analysts predicting a surge in total value, the findings from Visa and Allium Labs' study serve as a crucial reality check.

They challenge existing perceptions of stablecoin utility and highlight the need for more nuanced data analysis techniques to understand the digital asset landscape.

As stablecoins edge closer to mainstream adoption, distinguishing between genuine use cases and inflated transaction volumes will be vital to unlocking their true potential in reshaping global finance.