- A crypto and Web3 expert notes that stablecoins are primarily used for institutional and DeFi applications, not for retail payments.
- Market makers, hedge funds, and DeFi account for 99% of all stablecoin transactions.
- Retail users account for only 1% of all stablecoin activity.
Stablecoins have undoubtedly transformed from a niche market to mainstream in just over a decade. It initially promised to provide people with the cost-efficiency, security, accessibility, and speed of cryptocurrencies without the volatility inherent to them. Issuers painted their hard 1:1 peg to fiat, mainly in US dollars, as a safe harbor in moving on-chain and real-world value.
However, Anton Golub, Chief Business Officer of Freedx, has shed light on why stablecoins are not really intended for payments and remittances. He claimed that only a small fraction of them are used for such purposes.
Institutions Accounting for 99% of Stablecoin Payments
According to Golub, he often gets heat from people who don’t really understand crypto when he talks about it. Nonetheless, he reiterated that stablecoins are “not for grandma’s remittance” and “not for buying your coffee.”
The crypto and Web3 executive highlighted that professional traders are the ones harnessing most of the stablecoins’ advantages. In fact, market makers, hedge funds, and proprietary traders account for 99% of all transactions in its ecosystem.
The majority of users utilize these stable digital assets to rebalance liquidity across exchanges. Additionally, issuers have designed them for high-frequency capital, rather than retail shopping.
Golub believes the utility of stablecoins in retail payments will never exceed 1% because their issuers didn’t tailor them for everyday transactions. McKinsey Financial Services’ latest report supports his analysis.
The data McKinsey gathered with Artemis Analytics shows that stablecoin transaction volume reached $35 trillion last year. Yet only $390 billion of that was traced to remittances, bills, or payrolls, comprising slightly over 1% of the flows.
The company confirmed that trading, swaps, internal transfers, and other decentralized finance (DeFi) activities almost completely dominated all stablecoin transfers. Interestingly, the report reveals that, in addition to the ease of conducting transactions, institutions find it easier to audit, monitor, and manage stablecoin transactions, particularly due to smart contract automation.
In a personal observation, the exponential increase in the use of artificial intelligence (AI) further enhances the mentioned operational efficiency.
Stablecoins Remain One of the Largest Drivers in RWA Flows
As of the weekend, RWA.xyz valued the real-world asset tokenization market at $673.036 billion. It fell from a $779.62 billion peak in October last year.
Stablecoins have remained one of the primary use cases for RWA tokenization, taking more than a 38% slice of the market at $296.26 billion. It continues to be a prime mover of the sector alongside tokenized repurchase agreements from banks and financial institutions ($334.99 billion).
