Circle, the issuer of $74 billion stablecoin USDC, is mulling the introduction of reversible transactions, according to reporting from the Financial Times.
The mechanism could allow for refunds “in cases of fraud or disputes” in a push “to become part of the financial mainstream.”
The FT quotes Circle president Heath Tarbert as recognizing “an inherent tension there between being able to transfer something immediately, but having it be irrevocable.”
However, such a paradox appears to undermine the very point of stablecoins — to be an improvement on traditional payment infrastructure.
Near-instant transaction finality makes stablecoins ideal as a backbone for global payments, and has been a key part of the marketing of blockchain based systems to traditional finance.
The signing of the GENIUS act in July kicked off an arms race between stablecoin providers to roll out payment infrastructure.
Last month, Circle announced its own purpose-built blockchain, Arc. Among its flagship features, Arc boasts of “deterministic sub-second settlement finality,” meaning any reversible transaction processing would need to be done off-chain.
The FT reports that Circle may add “another layer in which parties could agree to make counter-payments, akin to refunds on a credit card.”
Read more: Circle and Tether bug bounties aren’t enough says LlamaRisk
To freeze or not to freeze?
USDC already has a freeze (or “Access Denial”) function to make tokens held by a wallet untransferable.
This feature raises the question of why reversible transactions are necessary in the first place, when freezing and reissuing USDC to the aggrieved party would have an identical effect.
The GENIUS act states that issuers “must possess the technical capability to seize, freeze, or burn payment stablecoins when legally required and must comply with lawful orders to do so.”
While Circle can freeze USDC, it has regularly come under fire for neglecting to do so when it matters.
Following the $42 million hack of decentralized finance exchange GMX, observers criticized Circle’s lack of effective response.
Read more: Circle dragged for dragging feet as DeFi protocol GMX hacked
In the hour following the attack, the hacker swapped tens of millions of USDC to the (unfreezable) DAI stablecoin. They even moved 8 million USDC via Circle’s own bridging tool before swapping.
Blockchain investigator ZachXBT, who specializes in tracing funds and requesting their blacklisting, has consistently called out Circle for this lack of action.
According to a Dune dashboard of on-chain data from crypto compliance firm AMLBot, over 10 times more USDT has been frozen than USDC.
Tether has blacklisted a total of 1.5 billion tokens across over 2,400 addresses, while Circle has banned just 347 addresses holding just over 100 million USDC.
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Source: https://protos.com/circle-rarely-freezes-stolen-funds-but-wants-reversible-transactions/
