Circle Launches Arc: A New Layer-1 Blockchain for Stablecoin Applications

Circle, the organization behind the USDC stablecoin, has unveiled a new blockchain platform known as Arc. Distinct from networks like Ethereum or Solana, Arc is a Layer-1 network specifically crafted to support stablecoin-based applications. Stablecoins are digital tokens whose value is pegged to fiat currencies, such as the dollar. Arc represents Circle’s initiative to tackle the infrastructure challenges that hinder the widespread adoption of stablecoins on an institutional level.

Understanding Arc and Its Unique Features

“We’ve helped enterprises and builders utilize USDC across numerous networks,” stated Rachel Mayer, VP of Product Management at Circle, in an interview. “The consistent feedback has been: make costs predictable, ensure deterministic finality of settlement, and provide privacy that aligns with real-world obligations.” This article will clarify what Arc is, how it functions, and what differentiates it from other blockchain platforms. Although stablecoins like USDT and USDC have been part of the crypto landscape for years, their interest and adoption have surged following the enactment of the GENIUS Act, which was signed into law by President Donald Trump in July 2025. Nevertheless, Circle asserts that most current blockchains were not originally designed to support stablecoins. Common limitations highlighted by Circle include:

• Transaction volatility
• Fees unpredictability
• Lack of built-in compliance features

Circle claims that Arc addresses these issues by providing instant and irreversible transaction settlements (referred to as deterministic finality), predictable fees charged in stablecoins, optional privacy features that facilitate regulatory compliance, and native links to other blockchains as well as traditional financial systems. Arc will be introduced in three distinct phases: By utilizing USDC, a digital currency underpinned by real-world assets, Circle aims to remove the reliance on volatile tokens for transaction fee payments. The network can also accommodate other stablecoins as gas through a paymaster system. According to Circle, Arc’s fee model builds upon Ethereum’s EIP-1559 structure, however, it substitutes block-level adjustments with a weighted moving average based on network demand. This approach helps to keep fees low and predictable. Fees are denominated in USDC and directed to an on-chain Arc Treasury. “Arc’s rapid finality and native gas, combined with Circle’s CCTP and Gateway interoperability service—acting as a stablecoin liquidity hub—allow USDC to traverse the blockchain ecosystem with ease,” Mayer remarked. “This enables builders and users to utilize networks that suit their needs while benefiting from Arc’s stablecoin-optimized infrastructure.” This structure allows for dollar-based, auditable, and stable fee arrangements, which Circle claims are more advantageous to financial institutions compared to speculative token models. Arc’s consensus mechanism utilizes Malachite, a Byzantine Fault Tolerant (BFT) engine derived from Tendermint. Currently, validator selection is permissioned and focuses on operational resilience, geographical distribution, and regulatory compliance. Future plans include transitioning to a “permissioned” Proof-of-Stake model, as indicated by Circle. To mitigate the potential for misuse, Circle is working on tools such as encrypted mempools, batch transaction processing, and multi-proposer consensus—all designed to ensure fairer execution in financial applications. Arc features a modular privacy system intended to balance regulatory compliance with confidentiality. The initial feature offers confidential transfers that obscure transaction amounts while keeping addresses visible. Smart contracts engage with a cryptographic backend through precompiles, utilizing Trusted Execution Environments (TEEs) for secure computation. Institutions can selectively disclose information to regulators or auditors with the use of view keys. As development progresses, Arc intends to support:

• Enhanced financial tools
• Broader blockchain interoperability

Circle’s solutions link fiat and USDC across Arc and other blockchain networks: Mint transforms fiat into USDC on Arc, CCTP allows USDC to transfer by burning and reminting across different chains, while Gateway offers chain-agnostic USDC balances with embedded liquidity rebalancing for wallets and applications. “Arc bolsters the wider multichain ecosystem by unlocking new use cases, partners, and institutional liquidity on-chain,” Mayer asserted. “Builders and users can operate on networks that meet their needs while still leveraging Arc’s stablecoin-optimized rails.” Arc enters a competitive landscape comprising public Layer-1 blockchains like Bitcoin, Ethereum, and Solana, stablecoin-centric chains such as Plasma and Frontier, Layer-2 networks like Arbitrum and Base, and private or semi-public networks maintained by payment institutions. Circle’s unique advantage lies in its established role as the issuer of USDC, one of the leading stablecoins in the market. By creating a dedicated chain for programmable, compliant financial operations, Arc seeks to amplify the functionality of stablecoins beyond mere payments into realms like real-time settlement, tokenization, and global capital. “Regulatory clarity often acts as a catalyst for institutional adoption,” Mayer noted, emphasizing that Arc is structured to be “enterprise-grade.”