Catenaa, Monday, December 15, 2025-Circle began testing a privacy-preserving wrapped version of its stablecoin on Aleo, a Layer 1 network that uses zero-knowledge cryptography to encrypt activity.

The asset, called USDCx, offers bank-level privacy rather than full anonymity. Circle said the system keeps compliance records while limiting public visibility, a structure aimed at business uses such as payroll, e-commerce, humanitarian aid and cross-border transfers.

USDCx runs on an Aleo testnet and is backed one-to-one by traditional USDC kept in an xReserve.

The setup uses Circle’s cross-chain transfer and gateway systems to mint and redeem tokens without outside bridges. Circle described the process as trust-minimized.

Aleo said tokens bridged to other networks will not carry the privacy functions found on its chain.

The move shows how major issuers are responding to demand for controlled privacy. Protocols building new transaction-mixing tools claim they can separate illicit activity from normal usage, while earlier privacy networks now lean toward compliance models.

Circle said its approach pairs visibility with confidentiality to help companies scale stablecoin use while meeting reporting rules.

Aleo’s technology stems from research by early Zcash developers and academic cryptographers focused on bringing smart contracts to privacy networks.

Aleo launched its mainnet in 2024 and has drawn major backing, including a large funding round led by global investors.

Circle has not published detailed documentation on USDCx, and Aleo said an FAQ for the test asset is planned.