Circle Upgrades Its Cross-Chain Transfer Protocol (CCTP) to Cut Settlement Times

input: Circle, the issuer of USDC, launched an upgrade to its Cross-Chain Transfer Protocol (CCTP) that will cut settlement times from minutes to just seconds.

Circle, the issuer of USDCoin (USDC), has launched an upgrade of its Cross-Chain Transfer Protocol (CCTP) that will slash settlement times from minutes to just seconds.

The newly introduced CCTP V2 builds on its predecessor with updated smart contracts and APIs, reducing the average 13-19 minute settlement time between Ethereum and Layer 2 blockchains to nearly instant transactions.

“CCTP V2 removes barriers that have slowed the movement of digital dollars across supported blockchains,” said Nikhil Chandhok, Circle’s chief product officer, in a statement. The update also gives developers more control over cross-chain transactions and simplify what has often been a complex process.

With $58 billion in circulation, USDC is the second-largest stablecoin, lagging behind Tether’s USDT with $142 billion. As the stablecoin market continues to grow, faster transactions could help Circle stay competitive.

The upgrade will first be available on Avalanche, Base, and Ethereum, with more blockchains to be added over time. Meanwhile, CCTP V1 will remain active on 11 blockchains and has already processed over $36 billion in transfers since launching in 2023.

One of the key additions in V2 is “Hooks,” a feature allowing developers to automate post-transfer actions on the destination blockchain to further streamline the process.

Earlier in February, Circle co-founder Jeremy Allaire stated that he believes stablecoin issuers worldwide should be required to register with US authorities, regardless of the country they operate in.

In an interview with Blockworks, Allaire argued that firms issuing U.S. dollar-pegged stablecoins should not be allowed to bypass American regulations while still serving U.S. customers.

However, major stablecoin issuers like Tether are facing mounting pressure as regulators worldwide move to clamp down on crypto firms.

Recently, the European Union’s Markets in Crypto-Assets (MiCA) regulations approved six stablecoin issuers whose tokens will be allowed in the region’s market. Tether was excluded from the list.

Moreover, crypto exchange Kraken and Crypto.com are preparing to delist USDT and other non-compliant stablecoins from the European market in the coming months to comply with MiCA.

As the issuer of USDC, the world’s second-largest stablecoin, Circle stands to benefit from any regulatory clarity that allows financial institutions to integrate digital assets more freely. Pegged to the U.S. dollar, USDC is currently ranked as the eighth-largest cryptocurrency by market value.

Circle’s valuation reached $9 billion in 2022 when it attempted to go public via a special purpose acquisition company (SPAC) deal with Concord Acquisition Corp. However, the proposed merger was mutually terminated in December 2022 due to the U.S. Securities and Exchange Commission’s (SEC) delayed approval and the fallout from the FTX collapse and subsequent crypto winter.