Blockchain
What is missed in Visa’s “organic” stablecoin report
What are we talking about when we talk about bots in cryptocurrencies? While cryptocurrency advocates often view these blockchain-based peer-to-peer currencies and instruments as an advancement of human and financial freedom, it has been known for years that only a small percentage of crypto transactions actually occur between ordinary people.
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This was supported by a recent relationship co-authored by Visa and data firm Allium Labs on stablecoin use, found that less than 10% of stablecoin transactions – or just $149 billion out of a total trading volume of $2.2 trillion – in April they were “carried out by real people.” The companies have created a new metric that measures “organic payments activity” by filtering out bots and large-scale traders (likely meaning entities like exchanges).
The news certainly appears to undermine the idea that stablecoins are on a brisk adoption curve, with adoption occurring around the world, particularly in developing economies where users are turning to dollar-backed assets like USDT of Tether and USDC of Circle to protect against inflation and burdensome capital controls.
Indeed, stablecoins have emerged as one of the clearest areas of cryptocurrencies that appear to have both a clear product-market fit and real-life users. Tether, the largest stablecoin issuer, has raked in an enviable sum of $4.5 billion profit in the first financial quarter of the year. This is just one reason why everyone, including their mothers, seems to want to get into the game, from established financial institutions (including Visa!) to newcomers to the world of blockchain.
So, what’s the story here? Are stablecoins another example of overselling cryptocurrencies themselves, over-promising the idea of financial revolution and under-delivering, like the many so-called “Zombie Projects” that have come to light recently?
To some extent, even though bots drive over 90% of stablecoin volumes, the numbers representing “organic use” remain impressive: approximately 25 million monthly unique users exchanging nearly $150 billion in value in the month alone. month of April. This may pale in comparison to the capital flowing to other fintech platforms, but it’s nothing to complain about.
But more importantly, it’s worth asking why Visa is so interested in bot trading and what it considers a valid use. According to the report’s methodology, the “inorganic user filter” only counted “transactions that were sent from an account that initiated fewer than 1000 stablecoin transactions and $10 million in transfer volume.”
“Long story short, I think there are significant problems with what Visa is trying to do,” Austin Campbell, an adjunct professor at Columbia Business School and former fund manager for Paxos’ BUSD, told CoinDesk. “Visa is a payments company. They are probably trying to get a measure of cryptocurrency that to them resembles peer-to-peer payments or small merchants.”
“That means trying to exclude all trading, so not just automated trading,” he said. Trading, it should go without saying, is a pretty big part of why people use cryptocurrencies. Additionally, as far as Campbell knows, Visa’s report cut wallet addresses for centralized exchanges like Binance and Coinbase, both of which hold stablecoins used in services like prepaid cards, “some of which are literally Visa.”
None of this suggests that Visa is misrepresenting the data, because, for example, as a payments company, Visa’s main line of business could be disrupted by the adoption of stablecoins. Nor is that to say that having an accurate read on the actual usage of peer-to-peer stablecoins isn’t valuable information.
But to a large extent, “the narrowness of Visa’s vision is more reflective of Visa than stablecoins,” Campbell said.