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Study Uncovers Surprising Data: 90% Of Stablecoin Transactions Not Driven By Human Users

In a recent report by Bloomberg, it has been revealed that more than 90% of stablecoin transaction volumes do not originate from genuine users, according to a new metric co-developed by Visa.

Stablecoin Market Faces Data Reality

Visa and Allium Labs have created a dashboard designed to filter out transactions initiated by bots and large-scale traders to isolate those made by real individuals. Out of approximately $2.2 trillion in total transactions recorded in April, a mere $149 billion was identified as “organic payments activity” by Visa.

The data challenges the optimistic outlook of stablecoin proponents who believe these tokens can transform the $150 trillion payments industry. 

Fintech giants such as PayPal Inc. and Stripe Inc. have been exploring stablecoins, with Stripe co-founder John Collison expressing bullishness on the tokens due to “technical improvements.” 

Pranav Sood, the executive general manager for EMEA at payments platform Airwallex, commented on the findings: “It says that stablecoins are still in a very nascent moment in their evolution as a payment instrument.” 

Sood emphasized the need to focus on increasing existing payment infrastructure in the short and mid-term while acknowledging the long-term potential of stablecoins.

Accurately tracking crypto activity’s “real” value using blockchain data has always been challenging. Glassnode, a data provider, estimates that the record $3 trillion assigned to digital tokens at the bull market’s peak in 2021 was closer to $875 billion.

Analysts Predict Massive Surge Ahead

According to Bloomberg, the nature of stablecoin transactions often leads to double-counting, depending on the platform users employ for fund transfers. For example, converting $100 of Circle’s USDC stablecoin to PayPal’s PYUSD on the decentralized exchange (DEX) Uniswap would result in $200 of total stablecoin volume being recorded on-chain.

Visa, which processed over $12 trillion the previous year, could suffer if stablecoins gain widespread acceptance as payment. 

Interestingly, despite this troubling data, analysts at Bernstein predicted that the total value of all stablecoins in circulation could reach $2.8 trillion by 2028, nearly 18 times their current combined circulation.

While PayPal and Stripe have made strides in adopting stablecoins, Airwallex has observed limited demand for stablecoin-based payment solutions among its customers, primarily due to concerns about “user-friendliness.” 

Sood emphasized the significant barrier of overcoming entrenched payment methods, citing the continued use of checks for 40% to 60% of business payments in the United States.

The Bloomberg report sheds light on the dominance of non-genuine user activity in stablecoin transactions. The study underscores the importance of improving existing payment infrastructure and addressing user-friendly concerns to unlock the long-term potential of stablecoins.

Stablecoin

Featured image from Shutterstock, chart from TradingView.com

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PayPal’s PYUSD Fails To Capture Interest: 90% Of Supply Remains In Paxos’ Wallet

Paypal’s Ethereum-based stablecoin PYUSD has failed to capture crypto investors’ interest. According to data from Nansen, 90% of the stablecoin’s total supply still remains with its issuer Paxos’ wallet.

Paypal’s PYUSD Adoption Setback

The payment giant Paypal’s recently launched stablecoin PYUSD continues to struggle with adoption and has failed to gain traction since its official launch on August 7, 2023.

Despite PayPal having over 350 million users worldwide, on-chain data from Nansen has shown that only a small percentage of its user base is currently using and holding the PYUSD in self-custody wallets.

“On the surface there’s a lack of demand from crypto users for PYUSD when other alternatives exist,” said Nansen in a report.

However, it is believed that lack of enthusiasm might involve the stablecoin’s lack of utility and not being able to earn interest on the stablecoin, as highlighted by an X (formerly Twitter) user in a post on August 26, 2023.

The stablecoin’s holdings on crypto exchange wallets are also low, accounting for just about 7% of the stablecoin’s total supply. This percentage takes into account the balances on centralized exchanges such as Kraken, Crypto.com, and Gate.io.

Despite the high expectations in the crypto industry following the release of the stablecoin that it would actually promote wider adoption and introduce cryptocurrencies to the masses for the first time, the stablecoin has failed to live up to expectations and smart money investors seem perfectly comfortable to circumvent the stablecoin. 

The largest holder of the stablecoin holds less than $10,000 worth of PYUSD after the holder sold about 3 meme coins to purchase the stablecoin. Excluding contracts or exchanges, not more than 10 holders have a balance surpassing $1,000.

According to Coinmarketcap, PYUSD has a total supply of 43 million PYUSD tokens and pools in decentralized exchanges like Uniswap’s PYUSD/USDC and PYUSD/wETH accounts to only 50,000 PYUSD tokens respectively.

The PYUSD tokens have been criticized for being overly centralized, as the majority of its total supply turns out to be stored on centralized exchanges, resulting in difficulty in growing its circulation.

Despite such a high total supply, the collective total number of the stablecoin’s holders according to Etherscan is merely 324 at the time of this writing.

PayPal's PYUSD price chart from Tradingview.com (PayPal stablecoin)

Expectations On Ethereum For The Stablecoin

According to JP Morgan analyst Nikolaos Panigirtzoglou, following the first week of Paypal’s stablecoin launch, Ethereum enjoyed no benefit from PYUSD when looking at things such as increased network activity, increased Total Value Locked (TVL), and enhancing Ethereum’s network utility as a stablecoin/DeFi platform.

Crypto experts and enthusiasts have also criticized PayPal for choosing Ethereum for its stablecoin due to the blockchain’s high transaction fees.

Co-founder of Sei Network Jayendra Jog said, “The gas fees of using PYUSD will be ridiculous, which will disincentivize its usage.”

He further added, “To help make the user experience better, PayPal will either need to subsidize transaction costs or will need to help support PYUSD on other networks with cheaper gas fees.”

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Singapore Wraps Up Stablecoin Framework: Pathway to Global Adoption?

The Monetary Authority of Singapore (MAS) has unveiled the features of a new regulatory framework aimed at ensuring a high degree of stability for stablecoins in the country. This is the outcome of the central bank’s public consultation, which commenced in October 2022.

Feedback from this public consultation was considered during the design of this new set of stablecoin rules in Singapore. According to MAS, these rules will apply to single-currency stablecoins (SCS) pegged to the Singapore dollar or any G10 currency – including the US dollar.

MAS Releases “Key Requirements” For Stablecoin Issuers In Singapore

In a media release published on Tuesday, August 15, the Monetary Authority of Singapore outlined key requirements for issuers of single-currency stablecoins in the country. The new regulatory framework for stablecoins consists of various provisions relating to value stability, base capital, redemption timeframes, and disclosure.

Related Reading: US Congresswoman Raises Concerns About Paypal Stablecoin In The Absence Of Regulation

The central bank stated that reserve assets – of a stablecoin – will be subject to requirements relating to their composition, valuation, custody, and audit, to give a high level of assurance on value stability. 

Meanwhile, issuers are required to maintain minimum base capital and liquid assets to lower the risk of bankruptcy. This is to also facilitate an “orderly wind-down” of business – if the need arises.

Additionally, SCS issuers in Singapore must refund the equivalent value of the stablecoins to holders within five business days after a redemption request is submitted. 

Finally, the Monetary Authority of Singapore has mandated all stablecoin companies to provide appropriate disclosures to their users. Some of the information they are expected to disclose to their customers include SCS’ value stabilizing mechanism, the rights of SCS holders, and the audit results of reserve assets.

The MAS noted that only issuers that fulfill all requirements under this new regulatory framework can apply for their stablecoins to be recognized as “MAS-regulated stablecoins.” 

However, the financial regulator also warned issuers against misrepresenting their tokens as MAS-regulated stablecoins, as it may result in penalties under the revised stablecoin regulatory framework.

MAS’ Stablecoin Regulatory Framework – A Positive Sign For Global Adoption?

In the press release, the MAS defined stablecoins as digital payment tokens designed to maintain a constant value against one of more specified fiat currencies. “When well-regulated to preserve such value stability, stablecoins can serve as a trusted medium of exchange to support innovation, including the “on-chain” purchase and sale of digital assets,” it added.

Meanwhile, Ms. Ho Hern Shin, MAS’ deputy managing director, reacted to this development in a statement: 

MAS’ stablecoin regulatory framework aims to facilitate the use of stablecoins as a credible digital medium of exchange and as a bridge between the fiat and digital asset ecosystems. We encourage SCS issuers who would like their stablecoins recognized as “MAS-regulated stablecoins” to make early preparations for compliance.

Taking these statements into account, this new regulatory framework represents a positive attitude by the Singaporean authorities towards the use of stablecoin as a trusted means of payment. Moreover, it is expected to provide the needed clarity for stablecoin companies to operate in the country.

It is worth mentioning that Singapore is not the only country making positive strides in terms of stablecoin regulation. There have also been discussions on regulating these digital payment tokens in the United States.

Related Reading: Can PayPal’s PYUSD Be Frozen In Your Wallet Like Tether’s USDT?

In what was dubbed a “momentous move”, the US House Financial Services Committee recently advanced a bill titled “Clarity for Payments Stablecoin.” This proposed bill, if passed, will regulate the issuance and use of payment stablecoins in the United States.

Singapore

 

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Can PayPal’s PYUSD Be Frozen In Your Wallet Like Tether’s USDT?

PayPal and Paxos dominated the news cycle on Monday with the announcement of the launch of the PayPal (PYUSD) stablecoin, but concerns have been raised about the possibility of user assets being frozen in their wallets, as is the case with USDT.

Crypto Community Adverse to Paxos Wallet Freeze Feature

The PYUSD stablecoin issued by Paxos has a condition that is not too welcomed by the crypto community, which has dulled the initial excitement for the launch of the PayPal stablecoin. According to reports, Paxos, a blockchain infrastructure firm that issued the PYUSD has several centralization issues which give them a certain amount of control over user’s wallets. 

Information published on its GitHub account reveals that Paxos can freeze or suspend users’ wallets and transfer functions on PYUSD authorization in the case of a security threat. The Paxos freeze feature is quite similar to Tether’s USDT which is able to freeze/blacklist users’ addresses involved in fraudulent activities. Additionally, Paxos can withhold users’ funds and assets, as well as wipe the account clean if the law requires it. 

The reactions from the crypto community were instant and not too favorable as investors’ anxiety spiked at the thought of possibly losing their substantial digital assets or having their wallets on lock. 

Centralization has always been a touchy subject for the crypto community as decentralized networks are often believed to be more secure and distribute control among network participants rather than a central body. 

Paxos has stated that freezing accounts is unlikely to happen often, and the company itself would not execute the process. 

PayPal stock price chart from Tradingview.com (PYUSD Stablecoin)

PayPal Launches PYUSD Stablecoin

Global payment giant PayPal recently unveiled its latest innovation, the PayPal USD (PYUSD) stablecoin, on August 7, in collaboration with Paxos, a New-York based blockchain infrastructure company. The news comes as a significant development for the Paxos ecosystem, as the integration of cryptocurrencies into the financial industry continues to grow. 

The crypto community has largely welcomed this new development, as investors and traders are gearing up to take advantage of the token and its conveniences. Analysts also predict that popular cryptocurrencies like Bitcoin and Ethereum prices will also benefit significantly from the new stablecoin. 

The PYUSD is an ERC-20 token developed on the Ethereum blockchain backed by the US dollar. Launching PayPal’s stablecoin is expected to help make crypto trading and offerings easily accessible on the payment platform. 

With PayPal’s user base reaching 400 million in 2022, the PYUSD stablecoin launch will also help facilitate crypto adoption and awareness, exposing a significant portion of the global population to digital currencies. 

President and CEO of PayPal, Dan Schulman, commented, “The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. dollar. Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.”

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PayPal’s PYUSD Launch Triggers Calls For Stablecoin Bill

United States Republican Patrick T. McHenry, Chair of the House Financial Services Committee, has released a statement calling for the need to pass the Stablecoin Bill in the wake of PayPal’s launch of its own stablecoin PYUSD. 

The Call For A Stablecoin Law

According to the statement, McHenry believes stablecoins are the “pillar of our 21st-century payments system.” However, they must be regulated to reach their full potential. 

 Part of the statement read:

This announcement [Paypal’s PYUSD Launch] is a clear signal that stablecoins—if issued under a clear regulatory framework—hold promise as a pillar of our 21st century payments system,” said Chairman McHenry. “Clear regulations and robust consumer protections are essential to enabling stablecoins to achieve their full potential. That’s why it’s more important than ever that Congress enact legislation to provide comprehensive digital asset regulation, especially for stablecoins.”

McHenry also recognizes the role of Congress in providing regulatory certainty to the crypto industry and the need to enact these laws that can keep the US at the “forefront of digital innovation.”

The bipartisan Clarity for Payment Stablecoins Act recognizes the strong role that states have played in regulating digital asset firms and builds on successful state regimes, like New York’s. We are currently at a crossroads to keep America at the forefront of digital asset innovation. Congress is making significant, bipartisan progress on legislation to ensure the U.S. leads the financial system of the future. We must finish the job.

The bipartisan Clarity for Payment Stablecoins Act, which was advanced by the House Financial Services Committee last month, is a legislative framework that seeks to regulate payment stablecoins. Many will be hoping that this bill could spearhead the passing of other crypto-related bills. 

PayPal Continues Journey Into Web3

On August 7, payment platform PayPal announced the launch of its dollar-backed stablecoin, PayPal (PYUSD), in collaboration with Paxos (Paxos also happens to be the issuer of Binance’s BUSD). This is part of Paypal’s efforts to increase its Web3 offerings as the company believes that fully-backed, regulated stablecoins can transform payments in the Web3 space.

“The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. dollar,” said Paypal’s President and CEO Dan Schulman. “Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.”

This isn’t Paypal’s first attempt at launching a stablecoin. In 2021, the company explored the possibility of launching a stablecoin but faced a setback following heightened regulatory scrutiny from the US Securities and Exchange Commission (SEC). 

Crypto Total Market Cap chart from Tradingview.com (PayPal PYUSD stablecoin)