Circle Launches Privacy-Preserving Stablecoin, USDCx, on Aleo Testnet

Circle, the issuer of the USDC stablecoin, has begun testing a wrapped version called USDCx on the Aleo Layer 1 network. Aleo utilizes zero-knowledge cryptography to encrypt on-chain activity.

USDCx is designed to offer bank-level privacy rather than full anonymity. Circle's approach is to provide confidentiality while still maintaining necessary compliance records, limiting public visibility of transaction details. This structure is specifically aimed at business applications such as payroll, e-commerce, cross-border payments, and humanitarian aid.

Key Features:

• Mechanism: USDCx runs on the Aleo testnet and is backed 1:1 by traditional USDC held in an xReserve.
• Minting/Redemption: The system uses Circle’s own cross-chain transfer and gateway systems, allowing for trust-minimized minting and redemption without relying on external bridges.
• Privacy Scope: The privacy features are specific to the Aleo chain; tokens bridged to other networks will not retain the privacy functions.

This move highlights the growing trend among major stablecoin issuers to meet the demand for controlled privacy that aligns with reporting requirements. Circle emphasizes that its approach helps companies scale stablecoin use by balancing visibility for compliance with transaction confidentiality. Aleo's underlying technology is rooted in research by academic cryptographers and early Zcash developers.

December 2025, Cryptoniteuae