Circle's Arc Native Token: Reshaping DeFi Infrastructure and USDC's Fee Model

In late 2025, Circle Internet Financial's (CRCL) announcement of a native token for its Arc blockchain marks a pivotal shift in the stablecoin and DeFi landscapes. This move, designed to replace USDC as the primary gas token on the Arc network, signals a strategic pivot toward decentralized governance, enhanced scalability, and long-term stakeholder alignment. For investors, the implications are twofold: a reimagined fee model for DeFi protocols and a recalibration of USDC's role in the broader crypto ecosystem.

Arc's Native Token: A New Foundation for Programmable Finance

Circle's Arc blockchain, launched in August 2025 as an EVM-compatible Layer-1 network, was initially designed to use USDC for transaction fees and governance. However, the introduction of a native token-tentatively named "CRCL" in internal discussions-aims to decouple the network's utility from its stablecoin. This token will govern validator incentives, secure the network, and facilitate cross-chain transactions, while also enabling decentralized decision-making for protocol upgrades, as Coinrise reported.

The Arc testnet, launched on October 28, 2025, has already attracted over 100 institutional participants, including Goldman Sachs, BlackRock, and Fireblocks, underscoring the network's appeal to traditional finance players, according to Crypto-Economy. By aligning validator and developer incentives through token-based rewards, Circle hopes to foster a self-sustaining ecosystem where stakeholders are motivated to optimize network performance and security, as Parameter noted.

DeFi Protocols: Adapting to a Tokenized Fee Model

The shift from USDC to a native token for gas fees will force DeFi protocols built on Arc to reengineer their fee structures. Previously, protocols relied on USDC's liquidity and price stability to process transactions, but the new model introduces volatility risk tied to CRCL's market value. To mitigate this, protocols may adopt dynamic fee algorithms that adjust gas prices based on CRCL's on-chain demand or peg fees to a basket of assets, including USDC.

For example, lending platforms like Maple and Ethena, which already integrate USDC into their liquidity pools, may introduce CRCL staking mechanisms to incentivize liquidity providers. Similarly, automated market makers (AMMs) could tokenize CRCL-USDC pairs to hedge against token price swings while maintaining capital efficiency, as CoinMarketCap reported. These adaptations reflect a broader trend in DeFi: moving from speculative tokenomics to utility-driven models that prioritize network resilience.

USDC's Evolving Role: From Gas Token to Global Payments Rail

While CRCL takes center stage on Arc, USDC's dominance in the stablecoin market remains unchallenged. As of Q3 2025, USDC's circulating supply hit $73.7 billion-a 108% year-over-year increase-driven by institutional adoption in payments, remittances, and tokenized money market funds like USYC, according to LookonChain. Circle's Q3 revenue surged 66% YoY to $739.8 million, with 80% of profits derived from interest on U.S. dollar reserves held in USDC, as Coinotag noted.

The native token's introduction does not diminish USDC's utility but rather refines it. By offloading gas fee responsibilities to CRCL, USDC can focus on its core strengths: serving as a low-volatility medium for cross-border transactions, FX settlements, and DeFi collateral. This separation of roles mirrors the evolution of Ethereum's ETH and stablecoins like DAI, where distinct tokens handle governance and transactional needs.

Risks and Opportunities for Investors

The success of Arc's native token hinges on three factors:
1. Adoption Rates: If institutions and developers fail to migrate from USDC to CRCL for gas, the token's utility-and thus its value-could stagnate.
2. Regulatory Scrutiny: The SEC's ongoing focus on stablecoins and tokenized assets may delay Arc's full launch or impose compliance costs.
3. Competition: Projects like Solana and Ethereum's Layer-2 solutions offer faster, cheaper alternatives for stablecoin transactions, potentially limiting Arc's market share.

However, the potential rewards are significant. A thriving Arc network could generate recurring revenue for Circle through token issuance, staking yields, and subscription fees. Moreover, the modular blockchain's support for cross-chain transactions and tokenized assets positions it to capture a slice of the $1.2 trillion digital asset market, as Bernstein reported.

Conclusion: A Strategic Bet on Programmable Finance

Circle's native token for Arc represents more than a technical upgrade-it's a strategic repositioning to dominate the intersection of DeFi and traditional finance. For investors, the key question is whether CRCL can replicate the network effects that propelled USDC to second-place market dominance. If Arc's testnet traction and institutional partnerships are any indication, the answer leans toward yes. However, the transition's success will ultimately depend on DeFi protocols' ability to adapt their fee models to a dual-token economy, balancing innovation with stability.