According to reports, Circle, the world's second-largest stablecoin issuer, is exploring reversible transaction mechanisms to help recover funds lost due to fraud and hacking. This move seems to contradict the core principles of cryptocurrency: transactions should be irreversible and not subject to centralized control.
Circle President Heath Tarbert stated to the Financial Times on Thursday that the company is considering relevant mechanisms to roll back transactions in the event of fraud or hacking. He also emphasized that the finality of settlement must be ensured.
“We are thinking about whether there is a possibility of transaction reversibility, but at the same time, we also want settlement to be final,” Tarbert told the Financial Times, “So there is a natural tension between achieving instant asset transfer and ensuring that transactions are irreversible.”
Proponents of reversibility argue that this mechanism can help victims of fraud and enhance mainstream market trust in stablecoins. However, this idea challenges the decentralized model on which cryptocurrency relies, where transactions are permanent and cannot be unilaterally altered by issuers or validators.
Cointelegraph has inquired with Circle about the specific details of transaction reversibility and the parameters for rolling back transactions.
Despite the risks of centralization, transaction reversibility played a role when decentralized exchange Cetus suffered a digital asset attack exceeding $220 million on May 22, with validators successfully freezing $162 million of the assets.
A week later, Sui validators returned the frozen $162 million to Cetus through a governance proposal.
While some decentralized advocates criticize the ability of validators to freeze funds, other industry observers believe that the quick response is an important advancement for the crypto industry in dealing with hacking incidents.
Circle President Tarbert stated that although the blockchain industry is often seen as the future of finance, borrowing certain characteristics from traditional finance (TradFi) may be beneficial.
However, he pointed out that some advantages of the existing system have not yet been reflected in the blockchain space, adding that some developers believe there should be a degree of transaction reversibility in cases of fraud, provided that all parties reach a consensus.
Meanwhile, Circle is accelerating its layout of institutional-grade infrastructure.
In early August, Circle announced the launch of its Layer-1 (L1) blockchain, Arc, which aims to provide "enterprise-grade infrastructure" for stablecoin payments, foreign exchange, and capital market applications.
On the Arc blockchain, Circle's USDC will serve as the native gas token for transactions.
Cointelegraph reported on August 18 that Circle plans to launch Arc in the form of a public testnet this fall, with a full launch expected by the end of 2025, and will integrate with Fireblocks' digital asset custody and tokenization platform to ensure custody and compliance support services.
The joint launch of Arc and Fireblocks will allow banks and asset management institutions to access the blockchain network from day one, with Fireblocks currently serving over 2,400 banks.
Related: Ethereum at a critical moment: ETH price pattern breaks, $4,000 becomes the last line of defense
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