- Stablecoin giant Circle is reportedly studying the integration of “reversibility” in USDC transactions.
- Company President Heath Tarbert claimed the feature aims to protect stablecoin holders against fraud and hacks.
- The crypto community is divisive on the matter, with critics pointing out that the measure deviates from the immutable nature of blockchain.
Circle revealed that it’s exploring a feature that would enable “reversibility” of transactions in USDC. Critics react to the stablecoin issuer’s potential departure from the key foundation of cryptocurrency assets.
Circle Studies Reversibility of USDC Transactions
According to the Financial Times, Circle President Heath Tarbert confirmed on Thursday the possible integration of the new feature in the future. He said they are currently examining the mechanism that would allow the rollback of transactions in the event of fraud or hacks. However, they plan to implement the feature without compromising settlement finality in its network.
Tarbert admitted there’s hostility to the proposal because the public sees it as a contradiction to the guiding principle of blockchain, particularly its immutability. This means all transactions occurring there are irreversible. Records immediately attain permanence, preventing their deletion or alteration in any way. These are safeguards against possible tampering, manipulation, and security exploits.
A Move to Appease Regulators
Tarbert’s move is an apparent effort to appease regulators. Circle’s proposal, if successful in implementation, would align its mechanism with the workings of traditional finance (TradFi). On the other hand, its president clearly wants to integrate the feature without altering the core tenet of blockchain technology, which is immutability.
The company has yet to officially discuss the specific measures to carry out its goal. But then again, the president’s statements suggest that they may be looking to enforce the system via a special protocol or by introducing a second layer.
Analysts speculate that Circle may deploy a smart contract enabling a non-custodial escrow and an on-chain dispute resolution process. The infrastructure would remove the reliance on a third-party intermediary and allow funds to be either released to the recipient or refunded to the sender according to a pre-defined agreement. The design is similar to how credit card chargebacks work in TradFi.
Alternatively, Circle could leverage its new Arc network to allow parties to agree on “counter-payments” rather than a direct transaction reversal, providing a similar function to a chargeback. Furthermore, the Arc network could offer a privacy layer, encrypting transaction amounts to provide more confidentiality for financial institutions.
For Tarbert, reversibility is not a flaw when applied at an institutional scale. Instead, it’s useful when reinforced with clear rules and strict onchain enforcement.
