Written by: TechFlow
The stablecoin business is attracting more and more traditional companies to participate.
For example, Visa, a giant in settlement and payment in the Web2 world, is now gradually extending its business into the field of stablecoins.
Relying on its existing business network, Visa currently provides support for 50+ wallet partners, enabling fast and easy Visa credential issuance, enabling stablecoin users to make payments quickly and securely at more than 130 million merchants worldwide.
At the same time, Visa is also piloting the use of stablecoins such as USDC to expand the settlement capabilities of global card issuers and acquirers, providing greater flexibility for modern government bonds.
How would such industry giants view the current stablecoin market?
Recently, Visa, together with Castle Island (venture capital), Brevan Howard Digital (asset management) and Artemis (on-chain data analysis), released a research report on the stablecoin market, investigating and studying the current macro market, supply and demand, and adoption of stablecoins.
It is worth mentioning that the report focuses on five emerging countries: Brazil, Turkey, Nigeria, India and Indonesia, and comprehensively understands the use of stablecoins around the world by combining user survey results with on-chain estimates and qualitative insights from companies operating in these markets.
TechFlow TechFlow and organized the report, and the selected key points are as follows.
Key conclusions
- On-chain data proves that stablecoin usage is growing, whether in monthly active addresses, total supply, or settlement value;
- Stablecoins are established as a meaningful settlement medium, comparable to established transfer networks;
- Stablecoins are no longer just for crypto speculation. 47% of cryptocurrency users surveyed listed saving dollars as their stablecoin goal, 43% mentioned efficient currency exchange, and 39% said generating income;
- When asked about non-crypto stablecoin activity, the most popular use of stablecoins was currency substitution (69%), followed by payment for goods and services (39%) and cross-border payments (39%).
- The vast majority (about 99%) of stablecoins are referenced to the U.S. dollar. When discussing U.S. stablecoin regulation, one cannot ignore the fact that a large number of individuals and companies in emerging markets rely on these networks for savings, cross-border payments, remittances, and corporate cash management;
- The potential welfare benefits of effectively accessing an alternative to hard currency for billions of users in emerging markets must have a place in discussions about the merits of stablecoins;
The market situation of stablecoins: not only for speculation, but also the new "savior" of emerging countries
Key Takeaways
- Stablecoins are the “killer app” of cryptocurrency
- There is now over $160 billion worth of stablecoins in circulation, up from a few billion in 2020. More than 20 million addresses trade stablecoins on public blockchains each month. In the first half of 2024, the settlement value of stablecoins exceeded $2.6 trillion
- Based on the divergence between stablecoin activity and crypto market cycles, it is clear that stablecoin adoption has expanded beyond just serving crypto users and transaction use cases.
(The above chart shows that even when CEX trading volume was sluggish and the crypto market was at a low point, the monthly sending addresses of stablecoins continued to increase, indicating that the adoption of stablecoins is not limited to crypto trading/speculation)
Particularly in emerging markets, they are used for currency substitution (escape from volatile or depreciating local currencies), as alternatives to dollar-based bank accounts, B2B and consumer payments, obtaining various forms of yield, and trade settlement. Stablecoins are particularly attractive when dollar banking is non-existent or difficult to access, in countries with high inflation, or where the ability to use fiat transaction networks is poor or costly.
Macro data at a glance: Stablecoins are rising strongly, and blockchain is gradually becoming "dollarized"
Key Takeaways
- Over the past 17 years, the total supply of stablecoins has grown rapidly, reaching a peak of approximately $192 billion in March 22.
- Terra's UST dissolution and credit crunch suppressed crypto native rates and reduced crypto trading volumes; after the credit crisis was largely over, stablecoin supply began to recover in December 2023 as major crypto assets began to rebound ahead of the approval of the US Bitcoin ETF.
- As crypto-native and sovereign interest rates rise, certain stablecoin issuers are beginning to experiment with models that pass on revenue to holders, either programmatically on-chain or through third-party revenue-sharing arrangements.
- Most notably, Ethena’s USDe, a synthetic dollar token that earns its earnings from arbitrage between Bitcoin and Ethereum futures and spot, ranks fourth with a supply of over $3 billion.
- USDT (initially issued on the Bitcoin Omni protocol) was the first stablecoin to achieve breakout success, and Tether remains the largest and most widely used stablecoin.
- As Circle's USDC saw impressive growth, Tether dominance fell below 50% in 2022. Since then, Tether's supply market share has recovered and stabilized at around 70%.
- In 2023, people used these stablecoins to make transactions totaling $3.7 trillion.
- Halfway through 2024, people have already used them to make $2.62 trillion in transactions. If the momentum continues in the second half of the year, the full year could reach $5.28 trillion.
- While 2022 and 2023 have been tough years for the cryptocurrency market as a whole (many cryptocurrencies have seen falling prices and fewer exchanges trading volume), the use of these stablecoins has been steadily growing.
- By value settled as of June 2024, the most popular blockchains are Ethereum, Tron, Arbitrum, Coinbase’s Base, Binance Smart Chain, and Solana.
- The most popular blockchains for sending stablecoins are Tron, Binance Smart Chain, Polygon, Solana, Ethereum. Ethereum generally has a higher fee burden, which means there are often fewer transaction addresses and transactions than Tron or Binance Smart Chain, but Ethereum is still the leader in settlement value.
- The “Dollarization” Story of Blockchain Emerges — Bitcoin and Ethereum have historically been the dominant medium of exchange on public blockchains, but stablecoins — and almost exclusively those pegged to the U.S. dollar — have steadily gained market share.
- Among the fiat currency anchoring options for stablecoins, the US dollar is overwhelmingly popular, followed by the euro, with a supply of $617 million as of June 2024, accounting for 0.38% of the entire stablecoin market.
- The U.S. dollar is the global reserve currency, but in no other use case category is it as dominant as stablecoins.
Alternative currencies have been around for years but have yet to gain traction. The overwhelming dominance of the U.S. dollar in the stablecoin space likely reflects the fact that most states have not created any local barriers to using U.S. dollar stablecoins, and users simply prefer the most liquid tokens, such as USDT and USDC.
Micro-adoption survey: Nearly half of players use stablecoins primarily for “saving money in US dollars”
Survey Method
About 500 people were surveyed in Nigeria, Indonesia, Turkey, Brazil and India, for a total sample of 2,541 adults.
We restrict our sample to existing crypto users, seeking to better understand the ways in which these individuals interact with stablecoins.
Key findings
While the most popular motivation for using stablecoins is to obtain cryptocurrency (50%), non-cryptocurrency uses such as obtaining USD (47%), generating yield (39%), and transactional purposes are also popular.
Stablecoins are preferred over USD banks due to their yield, efficiency and lower likelihood of government intervention
57% of users said their use of stablecoins has increased over the past year, and 72% believe they will increase their use of stablecoins in the future
The main reason for preferring Tether is its network effect, followed by user trust, liquidity and its record relative to other stablecoins.
Among non-trade use cases, currency conversion (to USD) was the most frequently reported activity, followed by paying for goods, cross-border payments, and paying or receiving wages.
Ethereum is the most popular blockchain among sampled users, followed by Binance Smart Chain, Solana, and Tron
The most popular wallet among the respondents is Binance (Exchange), followed by Trust Wallet, Metamask, Coinbase Wallet, Crypto.com and Phantom Wallet. The survey on wallet usage shows a clear long-tail effect.
Investigation details
The most popular goal for stablecoin users in the sample was trading cryptocurrencies or NFTs, but other non-cryptocurrency uses were not far behind.
Overall, 47% of respondents said one of their main goals was to save money in U.S. dollars, 43% mentioned better currency exchange rates, and 39% said to earn a yield.
The findings are clear: non-crypto usage accounts for a significant share of stablecoin usage patterns in the countries surveyed.
The most popular use is currency exchange, followed by shopping and cross-border transactions. Notably, the majority of respondents in all countries in the sample reported using stablecoins for non-crypto transaction use cases.
At the national level, the penetration of stablecoins in users’ portfolios varies from country to country.
Nigerians were far ahead of the rest of the sample, followed by Turkey and India. In the sample of Indian users, respondents from the wealthiest group also said they hold a larger share of stablecoins in their financial portfolios.
Nigerian users have the highest affinity for stablecoins among the countries surveyed. Nigerian users trade most frequently, stablecoins make up the largest share of respondents’ portfolios, they report the highest share of non-crypto transaction uses for stablecoins, and they have the highest self-perceived knowledge of stablecoins.
In Turkey, the most common goal was to earn a profit, followed by trading cryptocurrencies. For Indonesians, better currency exchange rates, followed by trading cryptocurrencies and saving money in USD. For Nigerians, saving money in USD was the primary goal, followed by trading cryptocurrencies and getting better currency exchange rates.
The results for India by income are stark: wealthier respondents have higher stablecoin penetration in their portfolios, they are more likely to use stablecoins for a wider range of use cases, including non-crypto use cases, and they are more likely to trust stablecoins over bank accounts.
Age factor: the new favorite of young people
Young people have a higher rate of stablecoin usage. Young people are more likely to try multiple different stablecoins, and they hold a higher share of stablecoins in their overall financial portfolio.
In terms of the frequency of converting fiat currencies, 34% of young people (18-24 years old) do it once a week, 38% do it once a month, while the oldest respondents (55+) account for 15% once a week and 46% once a month.
Across all non-crypto use cases, stablecoin usage is higher among younger age groups: paying for goods/services in stablecoins, remittances, and receiving salary in stablecoins.
Tether is more popular, but not unchangeable
Many report sticking with USDT out of habit, but would switch stablecoins if consensus around an alternative stablecoin emerged in their network.
Some users have also reported that they would switch from Tether if it were to be banned or face government intervention. Additionally, lack of yield is a potential reason to switch to alternative stablecoins.
Wallet usage: Ethereum is expensive but widely used
Ethereum is the most popular blockchain network across all regions, followed by Binance Chain, Solana, and Tron.
The result came as a surprise, as Ethereum fees have historically been too high for smaller retail payments.
The most popular non-custodial wallets are Trust Wallet, MetaMask, and Coinbase Wallet.
Fully half of the population reported using the Binance exchange as their wallet, more than any other non-custodial wallet. Notably, 39% of Nigerians surveyed admitted to using the Phantom wallet.
