Stablecoins are making significant waves in the payments sphere, primarily as a vehicle for non-speculative transactions, according to a new report by European hedge fund Brevan Howard.

In 2022, the stablecoin market settled an eye-watering value of over $11 trillion, drawing parallels to payments giant Visa’s annual figure of $11.6 trillion and overshadowing the numbers posted by Paypal and Mastercard during the year.

Paypal processed a total volume of $1.4 trillion during the year, while Mastercard reported settling a total of $6.57 trillion.

Adoption and Volume

Brevan Howard’s study, spearheaded by Peter Johnson and Sai Nimmagadda, dove deep into non-speculative stablecoin activities across prominent blockchains like Ethereum, Tron, and Binance Smart Chain (BSC). The research unveiled that over 25 million blockchain addresses held more than $1 in stablecoins.

The stablecoins at the heart of the study were chiefly fiat-backed, including USDT, USDC, BUSD, and TUSD. Bank deposits, U.S. Treasuries, and other liquid cash counterparts underpin these digital assets. The report found that these fiat-backed stablecoins accounted for a majority of the non-speculative activities.

The report also highlighted that the majority of stablecoin users in 2022 likely belonged to the small or retail category. An estimated 75% of weekly active stablecoin addresses conducted transactions amounting to less than $1000.

Additionally, the report revealed that stablecoin usage is not tied to patterns witnessed in crypto exchange volumes. Stablecoin volumes only dipped 11% since December 2021, while broader centralized and decentralized exchange volumes plunged 64% and 60%, respectively.

When stacking up against giants like PayPal, stablecoins outperformed, with

Diversification and Dominance

Although Ethereum settled a significant percentage — 50% — of all stablecoin volumes, it only contributed to 3% of total transactions, predominantly due to its lofty transaction fees.

Conversely, Tron and BSC combined powered 75% of all stablecoin transactions — equating to 41% of the total volume.

Tether’s USDT emerged as the uncontested leader in 2022, commanding roughly 69% of the total stablecoin supply. It comprised 80% of weekly active addresses and 75% of the transaction pie during the year.

Despite the success in 2022, stablecoins are trailing behind Mastercard year-to-date in 2023, primarily due to crypto market cycles and a challenging U.S. regulatory climate.

However, Brevan Howard’s projections suggest that stablecoins might surpass Bitcoin users within five years, driven by payment integrations and groundbreaking innovations.