Quick Breakdown:
- Circle tests a Refund Protocol on Arc to enable reversible USDC payments for fraud or disputes.
- Smart contracts allow escrow and on-chain refunds with mutual agreement.
- Aims to combine fast blockchain settlement with user protection for institutions.
Circle is considering a controversial feature that could allow certain payments on its Arc blockchain to be reversed in cases of fraud or disputes—an idea that challenges one of crypto’s core principles of irreversible transactions.
Balancing speed with settlement finality
In a September 25 interview with the Financial Times, Circle President Heath Tarbert said the company is examining whether reversibility can coexist with the need for settlement finality. “There’s an inherent tension between being able to transfer something immediately, but having it be irrevocable,” Tarbert explained. The company’s goal is to maintain the speed of blockchain payments while providing a mechanism to return funds in the event of fraud or errors.
Stablecoin issuer Circle examines ‘reversible’ transactions in departure for crypto https://t.co/AtYwFQmsTL
— Financial Times (@FT) September 25, 2025
To address this, Circle has introduced a smart contract tool called Refund Protocol, which allows payments to remain in escrow, supports dispute resolution through an arbiter, and enables refunds if all parties agree. Rather than directly reversing transactions, the system would permit counterparties to agree on counter-payments or refunds—similar to a merchant issuing a refund, but executed entirely on-chain.
Institutional-grade blockchain for USDC
The initiative comes alongside the rollout of Arc, an institutional blockchain designed to support USDC as native money. Arc aims to attract financial institutions by combining the speed and efficiency of blockchain with programmable features like refunds and mediated settlements.
If implemented, Circle’s approach could redefine how stablecoin payments work, offering a safety net for users without undermining the trustless nature of blockchain. The proposal signals a potential shift in how crypto platforms balance user protection with the industry’s long-standing commitment to final, irreversible transactions.
The move follows Circle’s partnership with Rise to modernize global payroll using USDC, enabling near-instant, low-cost cross-border payments for contractors and employees, further highlighting Circle’s strategy to merge blockchain technology with traditional financial safeguards. With 53% of users opting for stablecoin withdrawals, USDC now accounts for over 80% of crypto payments processed on Rise’s platform.
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