Ethereum News Today: Circle launches Arc—full Layer 1 blockchain for USDC-powered payments

Circle, the American stablecoin issuer behind USDC, has announced the launch of a new blockchain, Arc, which is not a rollup but a full-fledged Layer 1 (L1) chain. The decision marks a strategic shift as the company aims to create a self-contained, vertical-integrated infrastructure optimized for payments and stablecoin transactions. Arc will be Ethereum Virtual Machine (EVM)-compatible, allowing for seamless integration with existing Ethereum-based tools and applications, but it will use USDC as its gas token, distinguishing itself from traditional L1s that rely on native tokens. The chain promises deterministic finality, meaning transactions are either unconfirmed or 100% final and irreversible, a critical feature for high-volume payments and financial applications [1].

The move has sparked a debate within the crypto community, particularly on platforms like Twitter. Some view it as a potential erosion of Ethereum’s role as the settlement layer for stablecoins, while others argue it could reinforce Ethereum’s broader network effects through interoperability and cross-chain communication. The key question is whether Arc will act as a hub for internalizing stablecoin issuance and settlement, or if it will serve more as a spoke in a larger ecosystem, channeling liquidity and activity back to the broader EVM space via bridges like the Cross-Chain Transfer Protocol (CCTP) [2].

From a technical standpoint, Arc is built on Malachite, a high-performance Byzantine Fault Tolerance (BFT) consensus engine developed by Informal Systems. Circle has hired the core team behind Malachite, but the engine remains open-source and is being used in other projects, including Starknet. Ethan Buchman, co-founder of Informal, likens the use of Malachite to the widespread adoption of the Rust programming language, emphasizing its potential for broader application. Buchman also argues that Circle’s decision to build its own chain is not a rejection of Ethereum, but a standard business strategy for a company with the resources to do so—prioritizing control, predictability, and sovereignty [3].

The infrastructure cost comparison between sovereign L1s and rollups is also a point of discussion. While rollups “rent” Ethereum’s finality and data availability, sovereign L1s like Arc allow for full customization across the stack, including gas denomination, KYC integration, and dispute resolution logic. Barry Plunkett of Interchain Labs notes that while L2 solutions may be cheaper in some aspects due to reduced overhead, the costs are largely comparable when data availability is factored in. The choice, ultimately, comes down to strategic priorities: sovereignty for settlement economics and capital efficiency, versus time-to-market and composability for application developers [4].

The broader context of Circle’s move is a rapidly expanding stablecoin market. According to a Keyrock/Bitso report, stablecoin payment volumes have surged, with monthly payments surpassing $6.3 billion by February 2025. B2B transactions, in particular, have seen a sharp rise—from $120 million to $2.7 billion in just two years—while card-based flows have topped $1 billion per month. These figures underscore the growing importance of stablecoins in global payments and highlight the competitive pressure on firms like Circle to secure a dominant position in the settlement infrastructure layer [5].

Guillaume Poncin, CTO of Alchemy and formerly of Stripe, notes that the opportunity to control the settlement layer offers a revenue model that far outpaces traditional payment processing. He frames the L1 versus L2 debate as a trade-off between control and speed, with L1s offering full customization at the expense of development time and complexity. However, EVM compatibility is seen as a mitigating factor, as it lowers the barrier to entry for developers and users [6].

Critics have raised concerns about the potential fragmentation of the Ethereum ecosystem and whether Arc will weaken Ethereum’s long-term dominance. However, Buchman argues that Ethereum’s neutrality, conservatism, and fundamental role in the digital economy will ensure its longevity. Even if issuance and FX trading shift to Arc, Ethereum can continue to serve as a central hub for stablecoin flows. The key challenge lies in ensuring that Arc adheres to open principles, particularly regarding privacy, censorship resistance, and regulatory compliance—areas where Circle has been somewhat vague in its disclosures [7].

Ultimately, the success of Arc will depend on how it balances sovereignty with openness, and whether it can attract application developers and liquidity while maintaining interoperability with the broader EVM ecosystem. As Buchman suggests, the debate between L1s and L2s may continue to oscillate like the historical shift between on-premise and cloud computing—each model offering distinct advantages depending on the use case and market conditions [8].

Source:

[1] Blockworks. "Circle is building its own blockchain — and it’s not a rollup, but a layer-1." https://blockworks.co/news/circle-l1-impact-ethereum