Circle Exploring Refunds in Cases of Fraud or Disputes

Circle is reportedly exploring ways to reverse transactions involving its stablecoins.

That’s according to a report Thursday (Sept. 25) from the Financial Times (FT), which characterizes this effort as a “rare admission” from a cryptocurrency company, in this case the issuer of USDC, the second most popular stablecoin, that it needs to learn from the world of traditional finance.

In an interview with the FT, Circle president Heath Tarbert said a mechanism allowing refunds in cases of fraud or disputes would help the stablecoin industry become more mainstream.

“We are thinking through . . . whether or not there’s the possibility of reversibility of transactions, right, but at the same time, we want settlement finality,” he said. “So there’s an inherent tension there between being able to transfer something immediately, but having it be irrevocable.”

These measures, the FT noted, would mark a sharp diversion from the crypto sector’s past emphasis on the “immutability” of the blockchain, as well as a dramatic shift in attitude from a sector that has sought to distance itself from traditional finance.

Some crypto purists, the FT added, will see this move as akin to “heresy,” with one prominent venture capitalist telling the news outlet it was “offensive” to still consider Circle’s planned venture a blockchain.

Tarbert, a former chair of the Commodity Futures Trading Commission (CFTC), told the FT there were discussions happening among software developers “as to whether on certain blockchains for certain circumstances, provided all the parties agree, there could be some degree of reversibility for fraud.”

“People say blockchain technology, stablecoins, smart contracts, are superior in technology to the current system,” he added. “But there are some benefits of the current system that aren’t necessarily currently present.”

In other stablecoin news, PYMNTS spoke Thursday with John Ainsworth, general manager at Metallicus, and Jon Ungerland, chief information officer of DaLand CUSO, about credit unions’ efforts to embrace the digital tokens.

They offered a blunt warning to the community banking space: If members move liquidity to digital assets platforms that can also lend and settle payments through stablecoins, community institutions risk losing customers.

“About 18 months ago, it was pretty consistently 1% of deposits leaving institutions on a monthly basis and going to crypto exchanges. Earlier this year, it was about 3%. Now we’re seeing it, you know, edge up to 5% for our clients,” said Ungerland.

“If you’re in the money business and your competitor can do it exponentially faster, cheaper and safer than you, then you can’t compete.”