Circle Investigates Reversible Stablecoin Transactions to Mitigate Fraud and Align with Traditional Finance

Circle, the organization responsible for $74 billion in USDC stablecoins, is investigating the potential for implementing reversible transactions, a notable change aimed at aligning blockchain payments with conventional financial practices.

Key Takeaways:

• Circle is evaluating reversible USDC transactions to combat fraud and better align with traditional finance.
• The new blockchain, Arc, is designed for institutional use but has faced criticism for its perceived centralization.
• As stablecoins receive increasing political backing, Circle is repositioning USDC for wider acceptance and regulatory compliance.

In an interview with the Financial Times, Circle President Heath Tarbert mentioned that the company is considering how to incorporate refund options for USDC payments in instances of fraud or disputes, while still maintaining the finality of settlements that blockchain technology is founded upon.

“There’s an inherent tension between being able to transfer something immediately, but having it be irrevocable,” Tarbert remarked.

Circle Rethinks Strategy as It Targets Institutional Stablecoin Adoption

These remarks indicate a broader reassessment within Circle as it seeks to engage financial institutions and prepare for more extensive stablecoin adoption in mainstream finance.

The company has recently initiated testing of Arc, a new blockchain tailored for institutional applications, where banks, asset managers, and corporations could conduct transactions such as foreign exchange payments using stablecoins.

However, Arc has attracted criticism for being excessively centralized, which may conflict with the foundational principles of decentralization.

While Circle stated that Arc will not facilitate direct transaction reversals, it may introduce a “counter-payment” layer, akin to the refund processes used by credit cards.

This design would allow parties to mutually agree to reverse a transaction off-chain in a compliant and transparent manner, potentially making blockchain-based payments more palatable to larger institutions concerned about irreversible mistakes or fraud.

Community Insight: Stablecoin Valuations Under Spotlight
Tether eyes a raise at a $500B valuation, while Circle trades at just ~$30B.
Is Circle underestimated — or is Tether rewriting stablecoin dominance? How would stablecoin issuers’ revenue survive after rate-cut?
High… pic.twitter.com/VRpdDYh754

— SoSoValue (@SoSoValueCrypto) September 24, 2025

The initiative for reversible payments also illustrates Circle’s attempt to bridge the divide between cryptocurrency and traditional financial systems, even as some industry participants view this move as a deviation from blockchain’s fundamental principles.

A venture capitalist labeled the idea as “offensive,” questioning whether such a framework can still be classified as blockchain.

In the meantime, stablecoins are gaining momentum in Washington. A significant federal bill regulating the sector was passed in July, and the Trump administration has expressed strong support, seeing stablecoins as a means to enhance the global influence of the US dollar.

Tarbert echoed this perspective but dismissed concerns that stablecoins would siphon deposits from banks, suggesting that the funds may instead originate from other assets or new capital influxes.

Goldman Sachs anticipates a $77 billion increase in USDC by 2027, prompting Circle to adjust its offerings accordingly.

Trump-Backed GENIUS Act Boosts US Push for Dollar-Pegged Stablecoins

The recent enactment of the GENIUS Act, endorsed by President Trump, seeks to reinforce the dollar’s supremacy by supporting dollar-pegged stablecoins in international markets.

The Treasury Department predicts that the stablecoin market will surpass $2 trillion by 2028, a forecast that emphasizes the need for liquidity, interoperability, and regulatory coherence throughout the ecosystem. Tether’s latest actions highlight a practical shift toward that future.

As reported, Ripple CEO Brad Garlinghouse has indicated that the stablecoin sector is on the brink of significant growth, estimating that the market could expand from its current $250 billion valuation to as much as $2 trillion in the near term.

“Many people think it will reach $1 to $2 trillion in a handful of years,” Garlinghouse stated, adding that Ripple is well-positioned to take advantage of this trend.

Meanwhile, Western Union is preparing for a new era of digital transformation, showing strong interest in utilizing stablecoins to enhance its global remittance services.

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