Circle to Add Fraud-Protected Reversible USDC Transactions
Circle is developing a “reverse payment” mechanism atop its Arc blockchain to enable consensual rollbacks of the USDC stablecoin in fraud or hack events, while preserving settlement finality. Arc leverages the Malachite engine for 350 ms confirmations and 10,000 TPS, with planned privacy features to conceal amounts. Key challenges include defining reversal-eligible transactions and establishing neutral arbitration. The feature responds to growing demand for consumer protection as banks explore stablecoin-based cross-border payments. Recent incidents, such as Sui validators freezing $162 million after the Cetus DEX hack, demonstrate the value of reversible transactions. If launched, the mechanism could boost institutional demand for USDC—whose supply grew 90% year-on-year to $61.3 billion in Q2 (Bernstein reports $72.5 billion)—and strengthen its position over competitors like USDT and USDP.
Bullish
Short-term, the proposal is likely to boost institutional interest and net inflows into USDC as traders anticipate enhanced fraud protection and rollback capabilities, supporting peg stability. Over the long term, a reversible transaction layer could differentiate USDC from other stablecoins, driving greater adoption in DeFi and cross-border payments, and strengthening its market position. While centralization concerns and arbitration design remain focal points, the net effect is increased demand and enhanced trust in USDC.