A new briefing from the Federal Reserve Bank of Kansas City says stablecoins are still used overwhelmingly inside crypto finance, with traditional payment activity making up less than 1% of total usage. The study estimates that only 0.7% of stablecoins are currently tied to functions such as person-to-business payments, business-to-business settlement, payroll, remittances, and consumer purchases. That finding cuts against a common industry claim that stablecoins are already becoming mainstream payment rails.
The report was written by lead payments specialist Franklin Noll and lays out a detailed attempt to map where stablecoins actually circulate across the digital asset economy. Its central point is clear: stablecoins still function mainly as liquidity instruments for crypto markets, not as broadly used money for commerce. Most activity remains concentrated in trading, DeFi, and blockchain infrastructure.
Trading venues and DeFi account for the largest share
The study estimates that 48.8% of all stablecoins are used as trading assets within the crypto financial system. That bucket includes centralized exchanges, decentralized exchanges, lending protocols, collateral systems, and other DeFi applications. Exchanges alone represent 26.4% of total stablecoin usage, while DeFi protocols account for 17.2%. Infrastructure systems such as blockchain bridges make up another 5.1%.
The report says that even though stablecoins are often described as capable of operating independently from crypto finance, nearly half are still being used inside that system. It also identifies exchanges as a core operational hub because they handle custody, trading, conversion between stablecoins, and value transfers across blockchain networks. That concentration suggests the stablecoin market is still tightly linked to broader digital asset conditions rather than functioning as a standalone payment network.
Payment use is estimated at about $2 billion
The paper’s most striking figure is its estimate for payments. During the measurement period, the broader stablecoin market capitalization was put at about $300.5 billion, while only around $2 billion supported payment activity. Noll wrote that payments remain a very small part of the stablecoin world, accounting for less than 1 percent of all use.
The briefing does acknowledge that payment activity is growing, especially in cross-border transfers, remittances, supplier payments, and payroll. Still, it argues that rising transaction counts do not automatically mean payments are taking a larger share of the overall ecosystem. A large volume of stablecoin transfers outside the payment category reflects treasury management, movements into and out of DeFi, and settlement flows connected to tokenized financial infrastructure.
Bridge dependence points to interoperability limits
Another major finding concerns blockchain interoperability. The study estimates that more than 5% of stablecoins are tied up in infrastructure protocols, mainly bridges used to move assets between chains. In the report’s view, that is evidence that the ecosystem still lacks smooth interoperability.
It explains that bridges typically lock stablecoins on one chain and mint equivalent versions on another network. This design adds operational complexity and contributes to fragmentation across blockchains. The paper also says the infrastructure share may be understated because exchanges themselves provide important interoperability services that help users move value from one blockchain system to another.
A more cautious reference point for policy and markets
The Kansas City Fed briefing arrives at a time when regulators, banks, fintech firms, and payment companies are debating whether stablecoins could become meaningful alternatives to conventional payment systems. The study inserts a more cautious reading into that discussion. Its findings suggest stablecoins remain heavily concentrated in speculative and crypto-native financial activity, and that the ecosystem still rises and falls with the wider crypto market.
The report does not reject stablecoins outright. It notes that payment usage is growing and that blockchain-based financial infrastructure continues to develop. But its framing is different from the mainstream industry narrative: at present, stablecoins are used mainly to support crypto liquidity, cross-chain transfers, and DeFi activity, not as digital dollars for everyday commerce.