Circle Mulls Reversible USDC Stablecoin Transactions in Push for TradFi Adoption

Publicly traded stablecoin issuer Circle is exploring the possibility of reversible transactions involving its dollar-backed stablecoin, USDC, according to a report from the Financial Times. 

The firm’s considerations would stray from the concept of immutablity—one of blockchain’s foundational premises that does not allow for finalized transactions to be modified—but potentially catalyze the intertwinement of stablecoins within traditional finance. 

“We are thinking through… whether or not there’s the possibility of reversibility of transactions, right—but at the same time, we want settlement finality,” Circle President Heath Tarber told the publication. 

Tarber, who previously served as the chair and chief executive for the Commodity Futures Trading Commission, said that while some people believe blockchain is superior to current financial systems, “There are some benefits of the current system that aren’t necessarily currently present.”

As it stands today, Circle and other stablecoin issuers can freeze assets or blacklist addresses from engaging with their fiat-backed stablecoins—but they cannot undo or reverse a transaction once it’s reached finality.

For example, in May the firm froze $58 million in USDC tied to the Libra token scandal on Solana, rendering it unusable and untransferrable in the process. Hayden Davis and Ben Chow, who helped launch LIBRA, regained access to their funds in August via a court order.

According to Tarber, developers are reportedly discussing whether—in “certain circumstances” with agreeable parties—transactions could be reversed or refunded due to fraud on “certain blockchains.”

However, the Circle executive backed away from this being a possible function on Arc, the upcoming layer-1 blockchain being developed by the firm. Instead, he said, it would need to be a layer added on top of the Arc network. 

Circle first announced Arc in August, highlighting its stablecoin-focused build that will use USDC as a native gas token for transaction fees, as well as offer sub-second finality and opt-in privacy features.

Circle, which completed its massively successful IPO earlier this year, expects Arc to hit public testnet this fall. Shares of CRCL are down nearly 2% today, now changing hands above $129. 

The firm’s dollar-pegged USDC stablecoin maintains the 7th-largest market cap among crypto assets at more than $74 billion, according to CoinGecko.

A representative for Circle did not immediately respond to Decrypt’s request for comment.