Stablecoin leapfrog of PayPal is a sign of crypto dominance outside the US

Stablecoins leapfrogged PayPal last year in settlement volumes, while threatening to overtake Visa.

That’s according to a report from hedge fund giant Brevan Howard. The London firm found that cryptocurrencies pegged to the US dollar are gaining ground outside the US, and its betting on this boom for big returns.

Stablecoins pegged to the US dollar settled transactions worth more than $11 trillion in 2022, according to the report. That’s almost 10 times the value of transactions handled in 2022 by PayPal, and just shy of the $11.6 trillion handled by credit card payment company Visa.

“The rapid growth of stablecoin usage may surprise some US readers for whom the value proposition of stablecoins does not strongly resonate,” the report’s co-authors wrote.

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“However, stablecoin adoption is an inherently global phenomenon, as one of the primary value propositions of stablecoins is that they can provide basic, dollar-based financial services … to almost anyone with an internet connection.”

Almost three-quarters of stablecoin transactions occur on the Tron and BNB blockchains, which are popular with users outside North America and Western Europe due to their relatively low fees, the analysts found.

Take Lebanon, where the vast majority of transactions in dollar-pegged stablecoin Tether — USDT for short — are carried out on Tron, founded by Justin Sun, DL News previously reported.

“We have clients sometimes that ask us to send to them on BNB Chain,” Nasim Dirany, co-founder of brokerage Buy Bitcoin Lebanon, told DL News.

“Then at some point something happens like they get confused over the address format or something and they switch back to Tron.”

The affinity for Tron and USDT Lebanon stems, in part, from the country’s economic situation.

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In a country where the national currency pumps and dumps like a low-cap altcoin, stablecoins are useful precisely because they’re stable. Many Lebanese draw a firm distinction between stablecoins and the rest of crypto.

“Using USDT is not like actually using crypto — it’s a payment method,” Nader Dirany, Nasim’s brother, told DL News.

Lebanon’s situation isn’t unusual. In Hong Kong, for instance, Tether is more popular than Bitcoin and Ether.

Its massive popularity comes in spite of its struggle to shed a reputation for shadiness. A non-profit stablecoin rating agency, gave Tether a “D” grade in July.

“When it comes to Tether, what ends up holding the rating down to a fairly low level is the lack of an audit — the fact that people can’t be credibly convinced of its reserve plans,” Garett Jones, Bluechip’s chief economist, has told DL News.

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Although transaction volume on stablecoins is approaching that of Visa, the titan of traditional finance still handles far more transactions.

In 2022, Visa processed more than 192 billion transactions, according to the company’s annual report. Stablecoins settled only 1.3 billion transactions, according to Brevan Howard.

Given the global demand for dollars, the report’s co-authors argue transaction number and volume will likely continue to grow.

“Global audiences will increasingly access dollars via stablecoins,” the co-authors write. “This is a thesis that individual members of our team have been actively writing, speaking, and investing behind for over five years.”

Aleks Gilbert is our New York-based DeFi correspondent. Have a tip about stablecoins? Drop him a line at aleks@dlnews.com.