Visa: Stablecoins Boost Dollar Hegemony Globally
Factors such as revenue generation, transaction efficiency, and reduced exposure to government interference are driving the adoption of stablecoins.
Stablecoins are becoming an important part of the global financial system, according to a study sponsored by Visa and conducted by Castle Island Ventures and Brevan Howard Digital.
Notably, in the study “Stablecoins: The Emerging Market Story,” which included venture capital firm Castle Island Ventures, asset manager Brevan Howard, data firm Artemis and Visa Crypto, found that of the $2.6 billion in value settled so far this year, much of that has real-world applications. This is especially true in countries that have little access to traditional dollar-based financial services.
Visa Reveals: The Surprising Role of Stablecoins in the Reign of the Dollar
The report then shows that stablecoin usage is trending up, regardless of the crypto market cycle. It’s also increasingly used as a monetary instrument outside of digital asset trading or speculation.
In August alone, stablecoin transaction volume reached $461 billion (adjusted to remove inorganic activity from blockchain bots), according to data from Visa. Indeed, despite the cryptocurrency market falling over the past two quarters, this number is the third-largest ever and exceeds any point during the 2021 bull market.
Commenting on this fact, Nic Carter, General Partner at Castle Island Ventures, wrote: “While still small, they are expanding the reach of the dollar, especially in countries where the U.S. dollar is barely available.”
“If you compare the rate of dollarization in the stablecoin sector to other major categories of FX dominance, stablecoins are truly dominant. Even though they are small still, they are extending the reach of the dollar – especially in countries where USD is scarcely available,” posted Nic Carter via X on September 12.
It also notes that a whopping 98.97% of stablecoins in circulation are currently backed by US dollars. The most prominent of these is Tether (USDT). It currently accounts for 69% of the $170 billion stablecoin market.
The Rise of Stablecoins: Millions Choosing to Access the Dollar.
Specifically, the report included the results of a survey of 2,541 people across Nigeria, India, Indonesia, Turkey and Brazil, all countries where traditional dollar banking services are limited. The result was that 69% of crypto users had converted their local currency into stablecoins.
Incidentally, Nic Carter said they believe these conversions represent net flows into dollars, rather than “simply substituting dollar balances from one dollar instrument to another.
Now, 39% of respondents say they have purchased goods or services with stablecoins and sent money to a relative abroad, 30% have used stablecoins for business, and 23% have paid or received a salary in stablecoins. A total of 72% of respondents said that they would increase their use of stablecoins in the future. “End users want digital dollar instruments, and currency substitution is going to happen anyway,” said Nic Carter
To sum up, Stablecoins are positioning themselves as an attractive alternative to traditional dollar-based banking, especially in countries like Nigeria. Factors such as revenue generation, transaction efficiency and reduced exposure to government interference are driving their adoption.
By Leonardo Perez