Stablecoins (USDT, USDC, DAI) Future in Payments Questioned: New Research Insights

• Over 90% of stablecoin activity is driven by bots and large-scale traders, not everyday payments, according to a new study by Visa and Allium Labs.
• Lack of user-friendliness and difficulties in tracking real crypto activity with blockchain data are major barriers to wider adoption of stablecoins.
• Despite the potential benefits of stablecoins, such as instant settlement and minimal fees, user adoption and data transparency remain significant challenges.

A new study reveals that the majority of stablecoin activity is driven by bots and traders, not everyday payments, highlighting the challenges facing wider adoption of these digital tokens.

Stablecoin Activity Dominated by Bots and Traders

A recent study by Visa and Allium Labs reveals that over 90% of stablecoin activity originates from bots and large-scale traders, not real people. To measure genuine use, Visa developed a metric that excludes bot activity. This metric showed that only a tiny fraction, roughly $149 billion out of $2.2 trillion in total transactions in April, originated from real users. This finding contradicts the optimistic view of stablecoin proponents who believe these tokens will revolutionize payments.

Challenges to Wider Adoption of Stablecoins

Despite the potential benefits of stablecoins, such as instant settlement and minimal fees, experts suggest that user-friendliness is a major hurdle to wider adoption. Additionally, tracking real crypto activity using blockchain data is inherently difficult, leading to inflated figures. Financial technology giants like PayPal and Stripe are still exploring stablecoins. However, this study suggests these tokens have a long way to go before becoming a major force in the payments industry. User adoption and data transparency remain significant challenges.

Potential Risks of Bot Dominance

Some experts worry that the dominance of bot activity could create artificial price inflation for stablecoins. This could discourage legitimate users from entering the market and create a monopoly, further limiting real-world adoption. Ethereum, the world’s leading smart contract blockchain network, witnessed a massive surge in stablecoin volume last month. This surge also includes flash loan activity, which further inflated the figures.

Conclusion

The study by Visa and Allium Labs sheds light on the challenges facing the wider adoption of stablecoins. While these digital tokens offer potential benefits, such as instant settlement and minimal fees, the dominance of bot activity and difficulties in tracking real crypto activity pose significant hurdles. As the crypto industry continues to evolve, it remains to be seen how these challenges will be addressed to facilitate the broader use of stablecoins.