tl;dr
Visa's report highlights stablecoins' potential to revolutionize the $40 trillion credit market, while warning of risks like liquidity vulnerabilities and regulatory challenges. The article explores their rapid growth, dominance of USDC and USDT, and a recent $300 trillion stablecoin error that unde...
**Visa Sees Stablecoins as Key to $40 Trillion Credit Market, Cautions on Risks**
In a recent report, payments giant Visa has highlighted the potential of stablecoins to reshape the $40 trillion global credit market, positioning them as a bridge between traditional finance and blockchain innovation. While the report does not predict on-chain lending will reach the full $40 trillion, it emphasizes that stablecoin-based lending could enable financial institutions to transition parts of the credit market onto programmable, blockchain-based systems.
**Stablecoins: A Growing Force in Lending**
Visa’s analysis reveals that stablecoins—crypto assets pegged to traditional assets like the U.S. dollar—have already facilitated $670 billion in lending over the past five years. The market now includes 1.1 million unique borrowers, with an average loan size of $76,000. This figure has risen sharply, hitting $121,000 in August 2024, according to the report.
The dominance of two stablecoins, Circle’s USDC and Tether’s USDT, underscores their central role. Together, they account for 98% of stablecoin borrowing, mirroring their combined market capitalization of $257 billion (USDT: $181 billion, USDC: $76 billion) within the $307 billion stablecoin ecosystem.
**Regulatory Tailwinds and Industry Challenges**
The growth of stablecoins has been bolstered by regulatory developments, such as the U.S.-based GENIUS Act, which established a framework for stablecoin oversight. This has contributed to a $100 billion increase in the total stablecoin market cap this year. However, the rapid adoption has not been without controversy.
The International Monetary Fund (IMF) raised concerns in its 2025 Global Financial Stability Report, warning that stablecoin adoption could pose risks to financial stability. The report noted that stablecoins might encourage "excessive risk-taking, rising leverage, and maturity mismatch vulnerabilities" by offering alternatives to traditional safe assets and bank deposits.
**A Stumble in the Stablecoin Space**
The industry’s challenges were starkly illustrated by an incident involving Paxos, the stablecoin issuer behind PayPal’s USD (PYUSD). On Wednesday, Paxos inadvertently minted and then burned $300 trillion worth of PYUSD—a mistake it later attributed to an internal error. While the company clarified there was no security breach and customer funds remained safe, the incident highlighted the complexities of managing large-scale stablecoin operations.
**Balancing Innovation and Caution**
Visa’s report underscores the dual promise and peril of stablecoins. For traditional institutions, programmable money represents both an opportunity to innovate and an imperative to adapt. As the market evolves, regulators, financial institutions, and developers will need to navigate risks like liquidity vulnerabilities and operational errors while harnessing the efficiency and accessibility that stablecoins offer.
The path forward for stablecoins in the global credit market remains a high-stakes balancing act—between fostering financial inclusion and ensuring systemic stability. As Visa and others continue to explore this space, the interplay of innovation, regulation, and risk management will define the future of finance.