Stablecoin-denominated loans totaled $670 billion over the last five years, and $51.7 billion in the month of August alone, Visa said in a report released Thursday (Oct. 16) and emailed to PYMNTS.
On-chain lending facilitates capital market efficiency by using smart contracts to adjust interest rates based on supply and demand; creates global credit markets that never close, run automatically, provide transparent pricing and are open to anyone with internet access; and, with stablecoins, offer “fiat currency-denominated stability,” according to the report.
“On-chain lending reimagines financial services by using smart contracts to automate and facilitate intermediation instead of traditional institutions,” the report said. “When combined with stablecoins, these products enable new ways to lend and borrow with automated execution, near-instantaneous settlement and borderless capital flows — essentially creating a global credit market that never closes.”
Looking out over the next decade, Visa expects to see tokenized traditional assets unlock collateral pools, crypto collateral power new forms of credit programs, and on-chain identity enable undercollateralized lending at scale, according to the report.
To help organizations pursue opportunities in on-chain finance, Visa offers consulting and implementation support that includes market analysis, on-chain finance strategy and custody strategy, per the report.
“As on-chain finance evolves to serve more traditional financial use cases, Visa is committed to helping our partners navigate this transformation and seize the opportunities it presents,” the company said in the report.
It was reported in July that digital asset lending was making a comeback three years after the “crypto winter” and that lending activity is poised to accelerate.
Visa CEO Ryan McInerney said during a July 29 earnings call that the company is focused on innovation and product development in stablecoins and other dynamic areas.
“We are piloting and partnering with stablecoin companies … as we build out our stablecoin settlement stack … we are working to streamline treasury operations, improve liquidity management and enable quick and most cost-effective cross-border transactions,” McInerney said.
“We are also helping banks issue their own stablecoins and realize the benefits of programmable money,” McInerney added. “There is so much more to come in this space.”
