Less than 1% of stablecoins are actively used for direct payments, and a significant portion, approximately one-fifth, remains entirely unused, according to an analysis by a researcher at the Federal Reserve Bank of Kansas City. This finding emerges less than a year after the passage of the "Genius Act," a legislative effort aimed at fostering a regulatory framework for stablecoins and potentially accelerating their adoption for transactional purposes.
The Disconnect Between Promise and Practice
The data, published in a recent report by the Kansas City Fed, paints a stark picture of the current utility of stablecoins in the broader economy. While the digital asset class has seen substantial growth in market capitalization and investor interest, its practical application in everyday transactions, such as business-to-business (B2B) or person-to-person (P2P) payments, has yet to materialize at the scale many proponents had envisioned.
The research, which draws heavily on data from crypto analytics firm DeFiLlama, focused on the four largest stablecoins by circulation: USDT (Tether), USDC (Circle), USDE (Ethena), and USDS (Sky Dollar). These four collectively represent about 90% of the total stablecoin market, making them a reliable proxy for understanding broader market trends.
The analysis categorized stablecoin usage into several key areas:
- Trading-Related Purposes: Approximately half of all stablecoins are utilized for activities associated with cryptocurrency trading, such as hedging, arbitrage, or serving as a medium of exchange within digital asset marketplaces.
- Payments: A surprisingly small fraction, less than 1%, is dedicated to direct payments in the traditional sense.
- Non-Payments Fund Transfers: Roughly one-fifth of stablecoins are employed for fund transfers that do not fit the traditional definition of a payment, potentially including inter-entity transfers or specific types of digital asset settlement.
- Idle Assets: A substantial portion, around 21.2%, of stablecoins are not actively engaged in any economic activity and are essentially sitting idle.
The "Genius Act" and Future Expectations
The passage of the "Genius Act" in July 2025 by President Donald Trump marked a significant milestone in the U.S. regulatory landscape for digital assets. The act was designed to provide clarity and establish guardrails for stablecoins, with the explicit intention of encouraging their use as a more stable and efficient medium of exchange. However, the Kansas City Fed’s findings suggest that the intended "explosive growth" in stablecoin payments has not yet occurred.
"Payments defined in the traditional sense of B2B, P2P, and so on, have yet to live up to the promise of explosive growth proclaimed by many since the passage of the GENIUS act in July 2025," the report stated. "However, the use of stablecoins in payments is undoubtedly growing." This nuanced observation suggests a nascent, rather than established, adoption trend.
Challenges in Tracking the Stablecoin Market
The researcher behind the report acknowledged the inherent difficulties in accurately tracking the stablecoin market. The decentralized and rapidly evolving nature of the digital asset space makes precise data collection a persistent challenge, potentially contributing to variations in estimates provided by different industry observers.
This difficulty in tracking is underscored by other recent analyses of the stablecoin ecosystem. S&P Global Market Intelligence reported that approximately $269 billion in stablecoins were in circulation in 2025, with projections indicating a rise to $434 billion by 2028. However, S&P’s data also highlights a significant awareness gap, revealing that only 12% of American consumers are familiar with stablecoins.
Another report from Macquarie in March presented a more dynamic view of stablecoin activity, indicating that the total value of stablecoin transactions reached an impressive $1.78 trillion in February. This represents a substantial surge from $668 billion a year prior. Macquarie attributed this spike, in part, to increased engagement from major payment players like PayPal Holdings, Mastercard, and Fiserv, who are exploring the integration of digital assets into their offerings.
Global Expansion and Emerging Use Cases
The ambition to leverage stablecoins for payments is not confined to the United States. Payment giants are actively pursuing international expansion. Notably, PayPal recently extended the availability of its stablecoin to 68 countries, including nations in Latin America and Asia, as well as Greenland. This global rollout follows its initial introduction to customers in the U.S. and the U.K.
Beyond general consumer payments, industry insiders are identifying specific niche applications where stablecoins could gain traction. During recent industry discussions, including webinars hosted by Flagship Advisory Partners and discussions on Conference of State Bank Supervisors podcasts, payment professionals highlighted potential use cases such as:
- Remittances: The cross-border transfer of funds, where speed and cost-effectiveness are paramount.
- Airline Payments: Facilitating transactions within the travel industry, potentially for ticket purchases or ancillary services.
- Retail Marketplace Payments: Enabling smoother transactions within online and physical retail environments.
These specialized applications may offer a more immediate pathway to adoption for stablecoins, bypassing the broader complexities of widespread consumer payment integration.
The Road Ahead: Regulation, Adoption, and Innovation
The current landscape of stablecoin usage presents a complex interplay between regulatory developments, technological innovation, and market adoption. While the "Genius Act" has laid the groundwork for a more structured environment, the on-the-ground reality of stablecoin payments is still in its nascent stages.
The Kansas City Fed’s research serves as a crucial data point, illustrating that the journey from legislative enablement to widespread transactional utility is often a long and winding one. The significant portion of unused stablecoins suggests that further incentives, educational efforts, and demonstrable real-world benefits will be necessary to unlock their full payment potential.
As major financial institutions continue to experiment with and integrate stablecoins into their services, and as new use cases emerge, the market is likely to evolve. The coming years will be critical in determining whether stablecoins can transition from a niche digital asset to a mainstream payment instrument, fulfilling the promises that have fueled their development and regulatory attention. The ongoing challenge for the industry and regulators alike will be to navigate this evolving landscape, ensuring both innovation and stability within the digital asset economy.
