Circle Launches Arc – Layer-1 Blockchain Dedicated to Stablecoins

Circle's Layer-1 Solution for Stablecoins

Circle has cemented its position in the digital finance industry after completing a successful IPO in June 2025. Circle co-founder and CEO Jeremy Allaire has led the company in building an advanced blockchain infrastructure. While USDC primarily uses Ethereum, the leading Layer-1 blockchain, limitations in fees and transaction speeds have created a need for a new solution.

The event began when Circle announced Arc on August 12, 2025, and simultaneously released its Q2 2025 financial results, showing a 53 percent increase in revenue to $658 million and a 90 percent increase in USDC supply year-over-year, reaching $65.2 billion as of August 10, 2020. Arc was introduced as a standalone Layer-1 blockchain, designed to accommodate stablecoin-based financial applications and uses USDC as the default gas token. The product is built on Malachite technology from Informal Systems, a team that recently joined Circle. The public testnet will launch in the fall of 2025, with a mainnet beta in 2026.

Arc is designed to address issues such as unstable transaction fees and slow processing speeds on existing blockchains. Arc allows developers to use familiar tools and integrate a FX (foreign exchange stablecoin) engine, sub-second settlements, and privacy options thanks to EVM (Ethereum Virtual Machine) compatibility. The event comes as the GENIUS Act was signed into law in the United States, creating a favorable legal framework for stablecoins and giving Circle the opportunity to expand its global payments network. The liberal finance community has expressed excitement about Arc's potential, while the initial market reaction has seen Circle's stock surge.

Circle Creates Its Own Playground for Stablecoins

Arc not only strengthens Circle’s position in USDC, but also expands the company’s digital finance ecosystem. This includes the Circle Payments Network, which has more than 100 institutions, as well as its foreign exchange and capital markets applications. This could result in a 53% year-over-year increase in revenue to $658 million in Q2, boosting long-term profitability despite IPO costs resulting in a net loss of $482 million.

Arc provides an opportunity for partners ranging from banks, payment service providers (such as Binance, FIS, and Fiserv) to fintech businesses to build digital finance applications quickly and in compliance with regulations. Increasing the liquidity and capital efficiency of stablecoins, especially in cross-border transactions and financial investments, could drive broader market adoption.

The challenges posed

Arc is promising, but it faces many risks. Some developers and users in the crypto community are concerned about USDC’s independence and centralization, especially since Circle controls USDC. They are concerned about USDC’s use as a gas token. If Arc fails to prove its worth, its market share could be affected by competition from other Layer-1 blockchains like Ethereum, Solana, or stablecoin projects like Plasma and Tether.

Additionally, while the regulatory landscape is easing, regulatory pressure remains a concern. Arc could struggle to attract enterprise users if the SEC or international agencies impose new restrictions. Finally, technical issues such as security flaws or delayed deployments could hurt the project’s credibility, especially with the public testnet expected to go live in the fall.

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