Payments giant Visa has identified stablecoins as a potential gateway for traditional financial institutions to access the $40 trillion global credit market using blockchain technology. A new report from the company highlights the growing scale of on-chain lending and suggests programmable money could significantly reshape how credit is issued and managed worldwide.
The report does not predict that the entire credit market will move to the blockchain. Instead, it argues that stablecoins provide the necessary infrastructure for banks and other established lenders to bring their operations onto more efficient, programmable systems, representing a major opportunity for innovation in finance.
Key Takeaways
- Visa's report suggests stablecoins could integrate parts of the $40 trillion global credit market with blockchain technology.
- Over the last five years, stablecoin-based lending has already originated $670 billion in loans.
- The market is dominated by Tether (USDT) and Circle (USDC), which account for 98% of stablecoin borrowing.
- While adoption grows, regulatory bodies like the IMF have raised concerns about potential financial stability risks.
- The total market capitalization of stablecoins has surpassed $300 billion, showing significant growth in the past year.
The Growing Scale of On-Chain Lending
According to Visa's research, the on-chain lending market has already achieved significant scale. Over the past five years, a total of $670 billion in loans have been originated using stablecoins. This activity involves a substantial user base, with 1.1 million unique borrowers participating in these markets.
The size of these loans is also increasing, indicating growing confidence and utility. While the average loan size historically stands at $76,000, that figure saw a sharp increase in August, reaching an average of $121,000 per loan. This suggests that larger borrowers, potentially including institutions, are becoming more active in the space.
What Are Stablecoins?
Stablecoins are a type of cryptocurrency designed to maintain a stable value by pegging their price to an external asset, most commonly a major fiat currency like the U.S. dollar. This stability makes them useful for transactions and as a store of value within the volatile crypto ecosystem, differentiating them from assets like Bitcoin or Ethereum.
In its report, Visa emphasized the strategic importance for traditional finance to engage with this technology. The authors wrote, "For banks and financial institutions, this represents both an opportunity and an imperative to understand how programmable money is reshaping credit markets."
Market Dominance and Recent Growth
The stablecoin market is highly concentrated, with two primary assets leading the charge. Circle's USD Coin (USDC) and Tether's USDT together account for 98% of all stablecoin borrowing. This mirrors their dominance in the overall stablecoin supply.
At the time of the report, the total market capitalization for all stablecoins stood at $307 billion. Of this, USDT represented $181 billion and USDC comprised $76 billion, collectively making up over 83% of the entire market. This concentration highlights their critical role as the foundational assets for on-chain finance.
Rapid Market Expansion
The total market capitalization of stablecoins has expanded by $100 billion since the beginning of the year. This growth has been supported by increasing regulatory clarity, such as the passage of the GENIUS Act in the United States, which provided a legal framework for stablecoins issued by U.S.-based companies.
Market sentiment appears to reflect this growth trajectory. On the prediction market Myriad, 67% of users are forecasting that the total stablecoin market cap will reach $360 billion by the first month of 2026. This would require the market to add approximately $53 billion in value before the end of January.
Regulatory Scrutiny and Operational Risks
Despite the optimism from industry players like Visa, the rapid expansion of stablecoins has attracted attention from global financial regulators. The International Monetary Fund (IMF) recently addressed the topic in its 2025 Global Financial Stability Report, acknowledging the potential benefits while also highlighting significant risks.
The IMF noted that stablecoins offer alternatives to traditional safe assets and could improve cross-border transactions. However, the organization also warned of potential downsides.
"These trends raise the specter of excessive risk taking, rising leverage, and maturity mismatch vulnerabilities in the financial system," the IMF stated in its report.
These concerns center on whether stablecoin issuers hold sufficient, high-quality reserves to back their tokens and whether the complex financial products built upon them could introduce systemic risk.
Operational Hiccups Highlight Industry Challenges
The operational side of the stablecoin industry is not without its challenges. A recent incident involving Paxos, the issuer of the PayPal USD (PYUSD) stablecoin, drew significant attention. The company was observed minting and then immediately burning $300 trillion worth of PYUSD.
After a period of speculation, Paxos clarified the situation on the social media platform X. The company explained that it had "mistakenly minted" the enormous sum and that the error was quickly rectified. Paxos confirmed the incident was not a security breach and that all customer funds remained safe.
While resolved without financial loss, the event underscores the operational complexities and potential for human or software error when dealing with programmable money at such a massive scale. Such incidents can impact public and institutional confidence as the industry seeks broader adoption.
The Path Forward for Stablecoins in Credit
Visa's analysis points to a future where blockchain and traditional finance are increasingly intertwined. The core argument is that stablecoins can serve as the bridge, allowing the efficiency and transparency of blockchain to be applied to the established, highly regulated world of credit.
For this integration to succeed, several factors will be critical:
- Regulatory Clarity: Clear and consistent regulations, like the GENIUS Act, are needed to provide a safe operating environment for issuers and users.
- Institutional Adoption: Banks and other financial institutions must build the infrastructure and expertise to interact with blockchain-based systems securely.
- Technological Maturity: The underlying technology must continue to mature to prevent operational errors and withstand security threats.
The potential to unlock even a fraction of the $40 trillion credit market provides a powerful incentive for the industry to address these challenges. As major financial players like Visa continue to explore and validate the technology, the role of stablecoins in the global financial system is set to expand significantly.
