Visa: Stablecoins Originate $670B in Lending Over 5 Years

According to Visa’s comprehensive study, the stablecoin lending ecosystem has matured significantly, serving 1.1 million unique borrowers while demonstrating substantial growth in transaction size. The jump in average loan value from $76,000 to $121,000 between the study period and August indicates increasing institutional participation and larger-scale financial operations migrating to blockchain-based credit markets. This expansion reflects growing confidence in stablecoin infrastructure for substantial financial transactions beyond retail crypto trading.

The $670 billion lending volume originated over five years establishes stablecoins as a formidable force in decentralized finance. Visa’s report carefully notes that this doesn’t suggest on-chain lending will immediately capture the entire $40 trillion global credit market. Instead, the payments processor argues that stablecoin-based lending creates opportunities for traditional financial institutions to migrate portions of their credit operations onto programmable, blockchain-based systems that offer transparency and efficiency advantages.

Circle’s USDC and Tether’s USDT overwhelmingly dominate the stablecoin borrowing landscape, accounting for 98% of current lending activity. This mirrors their commanding position in the broader $307 billion stablecoin market, where USDT represents $181 billion and USDC accounts for $76 billion in circulating supply—together constituting 83% of total market capitalization. The concentration highlights how market liquidity naturally consolidates around the most trusted and widely adopted stablecoin providers.

The stablecoin market has gained $100 billion in market capitalization since the start of the year, partially driven by regulatory clarity from the GENIUS Act, which established a framework for U.S. company-issued stablecoins. This regulatory progress has bolstered market confidence, with prediction markets on platforms like Myriad showing 67% of users expecting the total stablecoin market capitalization to reach $360 billion by January 2026—representing a $53 billion increase from current levels.

Visa’s authors explicitly frame stablecoin adoption as both “an opportunity and an imperative” for banks and financial institutions to understand how programmable money is reshaping credit markets. The report suggests that traditional finance players cannot afford to ignore the migration of credit activities to blockchain rails, particularly as loan sizes increase and the infrastructure matures. This represents a significant shift from viewing stablecoins primarily as trading instruments to recognizing their potential in core banking functions like lending.

Counterbalancing this optimistic outlook, the International Monetary Fund issued warnings in its 2025 Global Financial Stability Report that stablecoin adoption could lead to “excessive risk taking, rising leverage, and maturity mismatch vulnerabilities in the financial system.” The IMF acknowledges that stablecoins offer alternatives to traditional safe assets and bank deposits while facilitating cross-border transactions, but cautions that their rapid growth without appropriate safeguards could introduce systemic risks that regulators must address.

The industry demonstrated both its vulnerabilities and resilience when stablecoin issuer Paxos mistakenly minted and immediately burned $300 trillion worth of PayPal USD (PYUSD). As PayPal’s official stablecoin partner, Paxos provides the infrastructure to manage the U.S. dollar-backed token. The company quickly addressed the error, confirming via social media that “there is no security breach” and “customer funds are safe,” while implementing fixes to prevent recurrence.

This incident highlights the operational risks inherent in rapidly scaling stablecoin infrastructure, even as the market demonstrates remarkable growth. Despite such challenges, the fundamental trajectory remains positive, with Visa’s data showing consistent expansion in both loan volumes and average transaction sizes. The market’s ability to quickly address and contain the Paxos incident suggests growing maturity in handling operational risks, though it underscores the need for robust systems as stablecoins assume increasingly important roles in global finance.