From Money Printing to Building Chains, Circle's 'Central Bank Dream'

Circle launched Arc, an L1 blockchain designed specifically for stablecoins, showcasing its ambition to transform from a publisher to an infrastructure leader, aiming to create a digital 'central bank' that controls the power from minting to clearing. (Background: Conversation with Circle's CEO: Profit Models, Banking Competition, and Arc Blockchain Strategy) (Context: The new battleground for stablecoins: The Layer 1 route battle between Stripe and Circle) If Arc successfully goes live and attracts enough users and liquidity, Circle will establish itself as a leader in the stablecoin infrastructure space. On August 12, the very day it released its first financial report post-IPO, Circle dropped a bombshell: Arc, an L1 blockchain built for stablecoin finance. If you only read the news headline, you might think it's just another ordinary public chain story. But when you interpret it in the context of Circle's trajectory over the past seven years, you will realize: This is not a public chain; this is a territorial declaration about a 'digital central bank'. Traditionally, central banks have three main functions: issuing currency, managing payment and clearing systems, and formulating monetary policy. Circle is gradually completing a digital replica—first gaining 'minting rights' with USDC, then building a clearing system with Arc, and the next step may be the formulation of digital currency policy. This is not just about one company, but a redistribution of monetary power in the digital age. Circle's Evolution of Central Banking In September 2018, when Circle and Coinbase jointly launched USDC, the stablecoin market was still dominated by Tether. Circle chose a path that seemed 'clumsy' at the time: extreme compliance. First, it proactively faced the most stringent regulatory hurdles, becoming one of the first companies to obtain a BitLicense from New York State. This license, known in the industry as 'the hardest crypto license in the world', had an application process so complicated that many companies were deterred. Second, it did not choose to fight alone but partnered with Coinbase to form the Centre Alliance—sharing regulatory risks and gaining immediate access to Coinbase's vast user base, allowing USDC to stand on the shoulders of giants from its inception. Third, it maximized reserve transparency: publishing monthly reserve audit reports by accounting firms, ensuring that 100% of the reserves were composed of cash and short-term U.S. Treasury bills, avoiding any commercial paper or high-risk assets. This 'honor student' approach was not popular in the early days—between 2018 and 2020, the era of wild growth, USDC was criticized for being 'too centralized', growing slowly. The turning point came in 2020. The explosion of DeFi summer led to a surge in demand for stablecoins, and more importantly, hedge funds, market makers, and payment companies began to enter the scene, revealing USDC's compliance advantages. From $1 billion in circulation to $42 billion, and now $65 billion, USDC's growth curve has been nearly vertical. But merely being a 'money printer' is not enough. In March 2023, Silicon Valley Bank collapsed, and Circle had $3.3 billion of reserves in that bank; USDC briefly decoupled to $0.87, and panic quickly spread. The outcome of this 'stress test' was that the U.S. government, due to systemic risk prevention, ultimately provided full guarantees for all Silicon Valley Bank depositors. Although not specifically a bailout for Circle, this event made Circle realize that merely being a publisher was insufficient; it needed to control more infrastructure to truly master its own destiny. What truly ignited this sense of control was the dissolution of the Centre Alliance. This event exposed Circle's dilemma of 'being a surrogate'. In August 2023, Circle and Coinbase announced the dissolution of the Centre Alliance, with Circle completely taking over the control of USDC. On the surface, this appears to be Circle gaining independence; however, the cost was heavy, as Coinbase gained a 50% profit-sharing right from USDC reserves. What does this mean? In 2024, Coinbase earned $910 million from USDC, a 33% annual increase. Meanwhile, Circle paid over $1 billion in distribution costs that year, most of which flowed to Coinbase. In other words, Circle's hard-earned USDC, half of its profits had to be shared with Coinbase. This is akin to a central bank printing money but having to give half of the minting tax to commercial banks. Additionally, the rise of Tron made Circle see a new profit model. In 2024, Tron processed $5.46 trillion in USDT transactions, handling over 2 million transfers daily, and earned substantial fee income merely by providing transfer infrastructure—a model that is upstream and more stable than issuing stablecoins. Especially under expectations of interest rate cuts by the Federal Reserve, traditional stablecoin interest income will face contraction, while infrastructure fees can maintain relatively stable growth. This also served as a wake-up call for Circle: whoever controls the infrastructure can continuously collect taxes. Thus, Circle began its transformation toward building infrastructure, planning multiple blooming layouts: Circle Mint allows enterprise clients to directly mint and redeem USDC; CCTP (Cross-Chain Transfer Protocol) enables native transfers of USDC across different blockchains; Circle APIs provide a complete set of stablecoin integration solutions for enterprises. By 2024, Circle's revenue reached $1.68 billion, and its income structure began to shift—besides traditional reserve interest, an increasing proportion came from API usage fees, cross-chain service fees, and corporate service fees. This transformation was confirmed in Circle's recently released financial report: data showed that Circle's subscription and service revenue reached $24 million in the second quarter of this year, although it accounted for only about 3.6% of total revenue (with the bulk still from USDC reserve interest), it had grown rapidly by 252% year-on-year. Transitioning from a single money printing interest business to a diversified 'rental' business provides greater control over the business model. The debut of Arc is the highlight of this transformation. This is a blockchain tailored for stablecoins (USDC): USDC serves as the native Gas, eliminating the need to hold ETH or other volatile tokens; institutional-grade quote request systems support 24/7 on-chain settlement; transaction confirmations in less than 1 second can provide enterprises with balance and transaction privacy options to meet compliance needs. These features are more like a technical declaration of monetary sovereignty. Arc is open to all developers, but the rules are set by Circle. Thus, from Centre to Arc, Circle has completed a triple jump: First jump: Acquiring minting rights (USDC); Second jump: Building financial pipelines (APIs, CCTP); Third jump: Establishing sovereign territory (Arc). This path almost replays the historical evolution of central banks in the digital world: from private...