The new system aims to reduce fragmentation, boost liquidity, and improve cross-chain stablecoin interoperability.
Circle on Tuesday introduced xReserve, a new system that enables blockchain teams to issue USDC-backed stablecoins that can easily move across different blockchains.
USDC is currently the second-largest circulating stablecoin with a market capitalization of $74 billion. The system employs Circle’s attestation service to verify transactions, reducing the need for third-party bridges.
Traditional bridged USDC tokens often do not work smoothly with native USDC, which limits liquidity and confuses users, Circle explained in a blog post.
“This fragmentation not only reduces available liquidity per chain but also compounds trust assumptions, as each bridge has its own security model, ultimately complicating risk and slowing adoption for developers and users,” the post reads.
However, xReserve addresses these issues by enabling blockchain teams to create their own USDC-backed stablecoins that interoperate with USDC via Circle’s CCTP and Circle Gateway.
The launch comes as demand for interoperable stablecoins grows. The broader stablecoin sector has ballooned to a $303 billion market capitalization, up sharply from $208 billion in January, according to DeFiLlama.
By allowing stablecoins to move freely across networks, systems like xReserve aim to reduce fragmentation, increase liquidity, and make it easier for people to participate in decentralized finance (DeFi).
How it Works
xReserve works in two main ways, according to the post. The first is that a user deposits USDC into xReserve on Ethereum, xReserve verifies it, and the partner blockchain uses that verification to mint the same amount of USDC-backed tokens for the user.
The second is a user burns their USDC-backed tokens on one blockchain, xReserve verifies the burn, and the destination blockchain uses that verification to mint the same amount of USDC or USDC-backed tokens for the user.
All transfers are verified through xReserve attestations to ensure security and transparency, the blog post explained.
Circle plans to launch xReserve with Canton and Stacks, allowing each blockchain to issue its own USDC-backed stablecoins. The system is also designed to support other digital assets, including EURC, in the future.
