What Does Visa-Level Volume Mean for Stablecoins?

In a recent post on X, Coinbase CEO Brian Armstrong shared a graph illustrating an unexpected development: stablecoin transaction volumes now rival Visa’s, a dominant player in global payments. This comparison not only highlights the growth of stablecoins in financial ecosystems but also raises questions about what these volumes actually represent.

Interesting graph from Visa pic.twitter.com/jNytaeCN88

— Brian Armstrong (@brian_armstrong) November 15, 2024

Facts and Numbers

As of the latest data, the transaction volume of stablecoins, led by popular ones like Tether (USDT) and USD Coin (USDC), reached over $1.3 trillion in a 30-day period. Visa, for context, averaged about $1.2 trillion per month in 2023. This growth reflects the massive rise of stablecoins as a transactional medium, especially in areas where traditional banking access is limited or cumbersome. Stablecoins have quickly transitioned from niche use to high-frequency digital assets, processing trillions annually across various blockchain networks. Despite fluctuations in the crypto market, stablecoins continue to grow in usage, showcasing a stability and reliability in transaction volume rarely seen in other digital assets.

Bots Drive Stablecoins, Humans Drive Visa

However, raw transaction volumes don’t tell the full story of adoption. A significant portion of stablecoin transactions is driven by bots, automated trading algorithms, and smart contracts interacting on the blockchain. These automated processes make up a large percentage of stablecoin transfers, with only a fraction attributed to human users conducting regular transactions.

On the other hand, Visa’s transaction volume primarily comes from consumer spending and direct transactions between individuals and businesses. This difference is crucial: while stablecoin volumes demonstrate the blockchain’s technical capability to handle massive transactions, they don’t equate to widespread human adoption. In essence, Visa’s transactions are “human-driven,” reflecting real-world consumer usage, while stablecoins are more “machine-driven,” with much of their volume reflecting algorithmic activity.

Implications of Stablecoins for the Financial Sector

The rise of stablecoins does, however, carry implications for the financial sector. Their ability to handle high volumes of transactions with minimal friction makes them attractive for cross-border payments, remittances, and DeFi applications. Stablecoins operate on blockchain technology, allowing for near-instant transfers at lower fees, which is particularly appealing for use cases beyond traditional banking. Yet, the reliance on automated activity rather than consumer transactions raises regulatory questions. As stablecoins inch closer to mainstream payment networks, regulatory bodies may increase scrutiny to ensure transparency and prevent market manipulation through automated transactions.

While the transaction volumes of stablecoins have reached levels comparable to Visa, the underlying dynamics are distinct. Stablecoins exhibit blockchain’s potential to process massive volumes, yet the current data does not reflect true consumer adoption. For stablecoins to become a household payment option, their transaction activity must shift from automation-driven to consumer-driven.