Stablecoins on several Layer-1 networks transacted $6.87 trillion in 2022, exceeding the transaction volumes of Mastercard and PayPal, which were $5.2 trillion and $4.5 trillion, respectively. However, stablecoins still lagged behind the Visa network, which processed nearly double the volume at $11.6 trillion.
Jamie Coutts, a crypto market analyst at Bloomberg Intelligence, attributed the growth of stablecoin adoption to network effects and significant improvements in blockchain scaling. He also noted that the number of stablecoin users could overtake Bitcoin users in the next three to five years.
However, Coutts also warned that stablecoin volumes have declined significantly in 2023 due to the cyclicality of crypto asset prices and an unfavorable US regulatory environment. Despite these challenges, Coutts argued that stablecoins have cemented their place in the digital age and are poised to reshape the digital financial landscape in the coming years. He pointed to the recent launch of PayPal’s PYUSD stablecoin as a sign of the growing acceptance of stablecoins by mainstream financial institutions.
The news of stablecoins surpassing Mastercard and PayPal comes as the payments industry is undergoing a period of rapid change. In February, Visa and Mastercard were reported to be pausing future crypto ventures until the regulatory climate had improved. However, Visa has since disputed these claims, and recent research data suggests that the company is actively working on crypto products.
PayPal also reversed course on its crypto plans, launching its PYUSD stablecoin in August. The company has also announced plans to integrate its stablecoin with decentralized finance (DeFi) applications. The growing adoption of stablecoins is a sign of the increasing demand for digital payments that are both fast and affordable. As the crypto ecosystem continues to evolve, stablecoins are likely to play an increasingly important role in the global payments landscape.
The future of digital payments looks set to involve a war of attention between legacy payment providers and the new wave of digital disruptors. With stablecoins overtaking Mastercard and PayPal in 2022, it will be interesting to see how the payments landscape evolves in the years to come.