Circle announced tools to turn USDC into a universal collateral for the creation of new stablecoins. Circle xReserve will build new infrastructure to turn USDC into a reserve asset, indirectly spreading to other protocols.
Circle’s stablecoin USDC may have a bigger role in the creation of new digital assets. USDC, one of the most transparently backed stablecoins, will introduce a new tool for setting up collateral and minting new stablecoins.
Circle xReserve will allow projects to mint new stablecoins, backed by USDC. USDC itself is compliant with current stablecoin legislation, and is one of the few asset-backed tokens that does not rely on T-bills.
The new infrastructure will be compatible with multiple chains and will use the USDC1 standard to mint new assets. The xReserve infrastructure will allow DeFi apps and users to make transfers between USDC-backed stablecoins and USDC across all supported blockchains, without relying on third-party bridging services.
Circle to unify stablecoin liquidity
Circle has already launched on multiple chains, both in native and bridged form. However, the bridged tokens are incompatible with native USDC and have a different risk profile. USDC is also one of the most widely targeted tokens for exploits, due to its ubiquitous presence among smart contracts.
Circle aims to remove the fragmented usage of USDC, which creates inefficiencies and confusion for users. With a new standard, chains can see direct transfers of native forms of USDC, without relying on bridges with different security models.
The xReserve infrastructure will directly target developer teams, who can launch USDC-backed stablecoins and use Circle CCTP and Circle Gateway.
USDC will use a unified deposit system on Ethereum
The xReserve smart contract will focus on the Ethereum ecosystem, but will remain compatible with other chains. USDC is still the most widely represented on Ethereum, with over $74B. Solana is the second-biggest network, with around $8B in USDC tokens.
XReserve will also support EURC tokens, an asset that has expanded its supply in the past year. The platform will offer a spot for USDC deposits from users, which the xReserve API will sign and verify.
The attestation can then be used by partner chains to mint USDC-backed tokens.
To move back into the original USDC, a user can submit a burn request for the newly minted tokens. The request then submits a withdrawal request to xReserve, which burns the USDC-backed tokens. The user can then choose another destination chain. For now, mints and burns are manual, but may be automated in the future.
Circle will expand the list of its partner chains. For now, the xReserve facility partners with Canton and Stacks, which will introduce their own USDC-backed stablecoins.
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