If you look strictly at the headlines, the cryptocurrency sector appears to be on the verge of overtaking the entire global financial system. Last year, stablecoins—digital currencies pegged to assets like the U.S. dollar—settled a staggering $35 trillion in transaction volume. A more detailed look will expose a much less distracting look at the phenomenon. In particular, based on the same study from McKinsey & Artemis, the amount of that described transaction activity supported by “true” utility” represents less than 1% of the articulated total. Thus, while the amount of activity is large and growing, the actual value of that activity is considerably less than the majority of the volume of activity may suggest.
Piercing the Hype Bubble
The research presents a clear and stark contrast in expectations for the industry as compared to reality; given the overall figure ($35 Trillion); one might think that this is a huge number where everybody is using it—however, the reality is that only about 1% (approximately $390 B) is actually being used for real payments. The majority of transactions in stablecoins still remain circular in nature; being made up mainly of people trading tokens, arbitragers executing trade-within-trade algorithmically via bots, and internal transfers that do not actually occur within the economy.
For many average consumers or small-business individuals, knowing this reality is important because while stablecoin advocates will argue stablecoins are taking the place of credit cards and wire transfers, this data indicates that for most people, stablecoins are better suited as “chipping points” in the roulette table of crypto trading than they are as an actual vehicle for purchasing anything of value.
Breaking Down the “Real” Billions
The report is also clear about where the 1% of the total number of stablecoins is coming from. First and foremost, the majority of the amount (approximately $226 billion) is accounted for by B2B (business-to-business) transactions, which benefit from the speed of blockchain versus multi-day wait times associated with international wire transfers. This business will continue to grow as businesses increasingly look for new ways to send and receive payments internationally.
Secondly, approximately $90 billion of the total transactions originate from global payroll and remittances. For people working in countries where the local currency is volatile and the banking infrastructure is limited, a dollar-pegged stablecoin like USDT or USDC is not a “nice to have” – it is a financial lifeline.
Finally, while only $8 billion came from capital markets activity (settling/brokerage of automated funds), this demonstrates the increasing reality of a merging of Wall Street and blockchain in the future.
A Drop in the Global Ocean
While stablecoins may have seen some growth since the beginning of 2023, they still represent an incredibly small part of the larger financial ecosystem. In their recent report, Stablecoin Payment Volume, they report that the $390 billion worth of stablecoins paid in real transactions represents only 0.02% of the estimated $2+ quadrillion dollar global payments market.
In fact, when you compare stablecoin payments against massive companies like Visa and Mastercard, which process trillions of dollars each year in remote consumer transactions, stablecoins are still very much in their infancy. While there is plenty of data that suggests that crypto will surpass traditional finance through the growth of stablecoin payment volume, there is a much larger scope. The magnitude of stablecoin payment volume is noteworthy, however, the actual monetary impact of stablecoin payments on traditional finance will take time to be fully realized as they will remain largely contained within the digital asset ecosystem for some time.
The Giants Enter the Arena
Traditional finance companies continue to compete for their share of the growth in a limited marketplace. The battle for supremacy in this new vertical has intensified. Payment processing companies such as Visa and Stripe are beginning to implement stablecoin features into their platforms. They acknowledge that although the usage of stable coins is minimal, their efficiency is unquestionable.
At the same time, companies built on crypto technology, including Tether and Circle, have shifted their focus from being a provider of financial tools to aggressively advertising their tokens as faster and less expensive alternatives to existing methods used by businesses when sending money internationally. This clash between “TradFi” (traditional finance) and crypto firms suggests that while today’s numbers are small, the infrastructure for a larger shift is being built.
Defining the Path to Scale
The report’s authors emphasized that these findings shouldn’t be seen as a failure, but rather as a baseline. “To be clear, the fact that true stablecoin payments are much lower than routine estimates doesn’t diminish stablecoins’ long-term potential as a payment rail,” the analysts wrote.
For stablecoins to move from a niche trading tool to a ubiquitous payment method, the industry needs to solve issues related to regulation, user experience, and volatility. The $35 trillion figure proves the technology can handle scale; the challenge now is convincing the rest of the world to use it for something other than speculation.
