Submitted by monrel, also found by monrel
https://github.com/code-423n4/2024-03-taiko/blob/f58384f44dbf4c6535264a472322322705133b11/packages/protocol/contracts/tokenvault/ERC20Vault.sol#L320-L335 
https://github.com/code-423n4/2024-03-taiko/blob/f58384f44dbf4c6535264a472322322705133b11/packages/protocol/contracts/tokenvault/adapters/USDCAdapter.sol#L43-L45 
https://github.com/circlefin/stablecoin-evm/blob/0828084aec860712531e8d79fde478927a34b3f4/contracts/v1/FiatTokenV1.sol#L133-L136
A recalling ERC20 bridge transfer can lock funds in the bridge if the call to mint tokens fail on the source chain. Depending on the Native token logic this could either be a permanent lock or a lock of an unknown period of time.
Example of how this can happen with the provided USDCAdapter:
USDC limits the amount of USDC that can be minted on each chain by giving each minter a minting allowance. If the minting allowance is reach minting will revert. If this happens in a recalled message the tokens together with the ETH value is locked.
USDC limits the amount of USDC that can be minted on each chain by giving each minter a minting allowance.
If _amount <= mintingAllowedAmount is reached for the USDCAdapter tokens can not be minted but since this is a recalled message the funds are stuck.
Both onMessageIncovation() and onMessageRecalled() call _transferToken() to either mint or release tokens.
https://github.com/code-423n4/2024-03-taiko/blob/f58384f44dbf4c6535264a472322322705133b11/packages/protocol/contracts/tokenvault/ERC20Vault.sol#L320-L335
A recalled message to bridge USDC L1->L2 will revert when we attempt to mint through the USDCAdapter
https://github.com/code-423n4/2024-03-taiko/blob/f58384f44dbf4c6535264a472322322705133b11/packages/protocol/contracts/tokenvault/adapters/USDCAdapter.sol#L43-L45
On the following condition in the native USDC contract
https://github.com/circlefin/stablecoin-evm/blob/0828084aec860712531e8d79fde478927a34b3f4/contracts/v1/FiatTokenV1.sol#L133-L136
Course of events that ends in locked funds:
Foundry, VScode
Add new functionality in the vault that allows users to send a new message to the destination chain again with new message data if onMessageRecalls() can not mint tokens. We give users the ability to redeem for canonical tokens instead of being stuck.
dantaik (Taiko) acknowledged and commented:
0xean (Judge) commented:
adaki2004 (Taiko) commented:
