Circle Faces Backlash Over Reversible USDC Plans

Circle is facing a lot of community backlash after publicizing plans to make USDC transactions reversible. The firm argued that this could prevent crimes, but might change DeFi forever.

This measure could recreate TradFi centralization on the blockchain, creating new pressure for DEXs and liquidity pools to do likewise. Some critics don’t believe reversible transactions would even deter thefts.

Circle’s Reversible Transactions

Circle has been growing in market prominence and expanding its ecosystem lately, so it’s no surprise that the company has some ambitious plans.

Still, a recent report details a possible future that once seemed unthinkable. Contrary to the notions of a trustless, immutable blockchain, Circle is exploring the feasibility of reversible USDC transactions.

In response, the community offered its strong backlash:

USDC is announcing reversible transactions. We've lost the plot. USDC is fiat on a surveillance ledger. This isn't crypto, it's tyranny. Freedom Dollar fixes this.

— Aaron Day (@AaronRDay) September 25, 2025

These criticisms take a few different forms. The initial included an interview with Heath Tarbert, President of Circle, who discussed the motivations to implement reversible transactions.

Simply put, the decision is an attempt to make DeFi align more with TradFi’s structures. This change could further encourage corporate participation with Circle.

Traditional finance institutions employ these rules for a few reasons. On one hand, they could become an additional guardrail to prevent fraud or minimize damage.

However, it inevitably involves creating official arbiters of what “fraud” is. Rather than a decentralized model, Circle would simply become a new bank-like institution.

Recreating TradFi Dynamics On-Chain

For some DeFi veterans, that isn’t a sufficient justification. The crypto community still feels the sting of prolonged debanking campaigns, and it has no interest in creating a similar power dynamic, even if “Web3-native” institutions are directing it.

Some experts have raised a few practical concerns: if Circle actually utilizes reversible transactions, who will be left holding the bag? Cryptoasset money laundering techniques are very advanced, and hackers could quickly convert stolen USDC to other chains.

In other words, if a major USDC theft takes place and Circle reverses the transactions, it might not impede the criminals in any manner.

Instead, liquidity pools or decentralized exchanges could lose their assets, which would in turn create more pressure for these institutions to de-anonymize their clients.

Some crypto developers are very passionate about creating trustless and anonymous financial institutions. Reversible transactions, however, would lead these platforms to face new market pressure alongside legal harassment.

Could This Even Stop Crime?

Moreover, not everyone is convinced that crypto crime is the firm’s true motivation. Circle executives claim that reversible transactions could prevent fraud, but the firm already lags in freezing stolen tokens.

ZachXBT has previously criticized the firm for its negligence in assisting crimefighters, and echoed these complaints today:

“[Circle executives] say this when they do not even proactively freeze [North Korean] or exploiter addresses,” he claimed.

Still, Circle hasn’t actually implemented reversible transactions yet. The report claimed that the firm is exploring multiple options, like a counter-payment layer for refunds on its institutional-grade blockchain.

These measures might allow corporations to have new guardrails amongst themselves while DeFi remains intact.

In other words, there’s a lot of uncertainty in this situation. If the crypto community truly wants to stop this proposal, it’ll need to make itself heard.