Author: Nancy, PANews
The competition for stablecoin infrastructure has already begun this hot summer. Currently, giants like Tether, Circle, and Stripe have all entered the field to develop their own blockchains, attempting to upgrade from mere on-chain payment tools to enterprise-level financial infrastructure. In this new battlefield, aspects such as payment experience, liquidity, and compliance advantages will become key bargaining chips for all parties involved.
Circle is about to launch L1, providing optional privacy features.
On August 12, Circle released its first report after going public. Although it reported a net loss of over $480 million due to non-cash expenses related to the IPO, Circle demonstrated a robust growth trend, with revenue increasing by 53% year-on-year and USDC's annual circulation volume surging by 90%.
With the official launch of the U.S. stablecoin bill GENIUS, the development of stablecoins has reached a historic turning point, significantly expanding growth space, while competition in the market intensifies with more traditional financial institutions entering the arena. Therefore, Circle is focusing on stablecoin payment infrastructure, striving to expand diversified revenue channels.
On the night of the financial report, Circle announced the upcoming launch of an open Layer 1 blockchain Arc specifically designed for stablecoin native applications, aiming to create a blockchain platform that balances efficiency, compliance, and developer-friendliness to meet the stringent requirements of enterprise-level finance.
"Arc is a critical moment in building a full-stack platform for internet financial systems. It combines the stability of stablecoins with the openness of blockchain, providing a trusted and efficient platform for enterprises, developers, and financial institutions, helping the global economy enter the programmable currency era," said Circle CEO Jeremy Allaire.
Arc is positioned as the operating system for global financial innovation, supporting core applications such as cross-border payments, on-chain credit, and capital market settlements, while providing secure and automated on-chain trading capabilities for machines, systems, and AI agents, supporting complex financial scenarios like real-time capital management, supply chain finance, and automated treasury operations.
According to official sources, Arc is built on the high-performance consensus engine Malachite developed by Informal Systems, with 4 to 20 regulated, geographically distributed well-known institutions serving as validators, achieving sub-second transaction finality with finalization times below 100-350 milliseconds, significantly enhancing transaction speed and efficiency, meeting the demands of high-value financial scenarios (such as cross-border payments and capital market settlements). As a blockchain compatible with EVM (Ethereum Virtual Machine), Arc enables developers to quickly utilize existing ecosystems and tools to build and deploy diverse stablecoin financial products. Therefore, in terms of consensus design, Arc follows a familiar consortium chain architecture in China, where nodes with admission thresholds that are secure and controllable are undoubtedly favored by regulators.
Arc uses USDC as its native gas and adopts a dynamic fee market similar to Ethereum EIP-1559, providing low and predictable fees priced in USD, addressing the pain point of enterprises unwilling to hold volatile crypto assets to pay gas fees. In addition to USDC, Arc also plans to support EURC, tokenized short-term treasury funds USYC, or tokenized currencies to pay gas fees through Paymaster, lowering the entry barriers for multi-currency markets. At the same time, Arc has a built-in institutional-level RFQ quoting system's foreign exchange engine, enabling instant, 24/7 settlements and price discovery among stablecoins. Additionally, Arc offers optional privacy protection to help enterprises comply with sensitive data handling (amount hidden, address visible), meeting regulatory and compliance requirements, and deeply integrates Circle's full range of products to build a stablecoin financial hub.
Arc's private testnet is expected to go live in the coming weeks, with a public testnet planned to launch this fall, and the mainnet Beta is expected to be officially released in 2026.
Multiple institutions are competing, and dedicated stablecoin chains may become a trend.
In the stablecoin field, Circle is not the first issuer to attempt to build its own chain.
"Some companies' strategies look exactly like moths flying into a flame." Following Circle's announcement of launching L1, this comment from Tether CEO Paolo Ardoino, which carries a hint of rivalry, has been interpreted in the industry as a dig at competitors.
As the largest stablecoin issuer in the world, Tether has already taken the lead by launching two blockchains specifically optimized for stablecoins, Plasma and Stable, aiming to accelerate the payment and settlement applications of USDT globally through zero-fee transactions, high throughput, and specialized stablecoin infrastructure.
Among them, Stable's positioning is similar to Circle's Arc, both targeting institutions and being EVM-compatible dedicated stablecoin L1 chains, both aiming to replace general-purpose public chains in cross-border payment, settlement, and compliance scenarios, but the two differ significantly in fee structures, target markets, compliance, transparency, and technical architecture.
For instance, regarding fees and gas mechanisms, Stable uses USDT as its native gas token, with zero fees for P2P transfers, and supports smart contracts priced in USD. This design caters to retail users (small transfers without pressure) while also facilitating institutions in handling cross-border settlements and on-chain micropayments; Arc supports various stablecoins like USDC and EURC as gas tokens and deeply integrates Circle's own foreign exchange services, CCTP V2 cross-chain protocols, and Circle Gateway functionalities, making it more suitable for institutions needing multi-currency and seamless cross-border liquidity.
Regarding compliance and transparency, Arc is backed by Circle's U.S. registration and IPO compliance background, with USDC reserves 100% supported by cash and U.S. Treasury bonds, and audited monthly by one of the Big Four accounting firms, complying with regulatory frameworks such as the EU's MiCA. This full transparency and high compliance is the 'safety net' preferred by institutions, but it also means high costs and low profit margins; Stable, on the other hand, relies on Tether's market dominance, with more high-yield but high-risk assets in Tether's reserves, and less transparency in information disclosure compared to USDC, which limits its penetration in strictly regulated markets but allows it to maintain higher profitability.
In terms of project progress and capital support, Stable has launched a testnet and completed a $28 million seed round financing led by Bitfinex and Hack VC; Arc has not yet entered the testnet stage, but USDC is backed by heavyweight institutions such as Coinbase and BlackRock.
The competition for L1 stablecoin public chains is not just a game for crypto-native companies. Recently, fintech giant Stripe has also been reported to be collaborating with crypto venture capital firm Paradigm to develop a payment-focused L1 blockchain called Tempo. This chain will be compatible with Ethereum programming languages and is positioned as an efficient, low-friction payment settlement network. Although Tempo is still in a secret development stage with a team of only five people, Stripe's accompanying actions demonstrate its ambition, including the $1.1 billion acquisition of stablecoin infrastructure company Bridge and the acquisition of crypto wallet developer Privy. This indicates that Stripe is building a full-stack crypto payment infrastructure covering issuance, custody, and settlement.
This trend of dedicated stablecoin chains may welcome more participants. Previously, stablecoins primarily relied on public chains like Ethereum and Tron, lacking underlying networks tailored for payment, settlement, and compliance scenarios. Now, as stablecoins enter mainstream financial markets and undertake larger-scale cross-border payment and financial settlement functions, more institutions developing their own chains will become a trend. However, building L1 from scratch means facing multiple challenges such as technical security, ecological cold starts, economic incentives, and regulatory compliance, requiring substantial investment and concentrated risk. In contrast, building L2 on mature public chains, while slightly less autonomous, can inherit existing security and liquidity, quickly connecting to developer and user ecosystems, and may become a more efficient and lower-risk compromise for some institutions.
