Circle Launches Arc, Its Own Layer 1 Blockchain

The question is whether this will generate genuine new activity or simply be another destination for existing crypto liquidity.

Article compiled by DeepChain TechFlow

Over the past few years, Circle has done one thing only: bring USDC to where users already are. Now it’s stepping in to build its own Layer 1, betting not on stealing liquidity from Ethereum or Solana, but on creating markets that don’t yet exist: stablecoin foreign exchange, institutional private finance, and autonomous agent economies. This article explains why Circle’s strategy is much bigger than it appears.

So far, you could fairly describe Circle’s business model as neutral. In other words, USDC is distributed everywhere users already are—such as Ethereum, Solana, Base, Tron, and others—and each chain competes for its liquidity.

But that single era seems to have ended. Today, Circle is officially greenlighting Arc, its own Layer 1 blockchain. Now, this stablecoin giant will begin building its own block space rather than merely renting others’.

If you haven’t followed Arc’s story, Circle first announced plans for this EVM-compatible L1 back in August 2025. The testnet launched in October 2025, and after nearly a year, the mainnet has finally arrived.

So what is Arc?

At its core, Arc is an EVM-compatible Layer 1, meaning Ethereum applications can largely be redeployed there directly without learning new programming languages or rebuilding from scratch. Under the hood, transactions are executeds Malachite consensus engine

The greater distinction lies in Circle’s foundational optimizations around it: gas fees are paid directly in USDC, transactions achieve final confirmation in under a second, and developers can deploy without permission (although the network initially launched with a permissioned set of known validators, including BlackRock, Mastercard, Visa, DTCC, and Standard Chartered). Arc also supports post-quantum wallet signatures from day one.

You can think of it as Circle trying to find a balance between cryptocurrency and traditional finance: open applications on top, and a more predictable, institution-friendly infrastructure underneath.

What has actually been launched?

Beyond simply transferring USDC, a wide range of activities are already possible. Over 100 applications are live, covering foundational DeFi (Uniswap, Aave, Morpho) as well as memecoins (fomo and Pump.fun), with Circle publicly supporting the latter as a way to nurture on-chain culture.

In an existing project, Circle’s Chief Technology Officer Nikhil Chandhok specifically highlighted StableFX, an on-chain foreign exchange system built to facilitate the exchange of USDC with growing local stablecoins. This bridging functionality is one of the core elements of Circle’s broader vision for Arc: Circle does not aim to issue every local stablecoin itself, but rather wants Arc to connect local currencies to USDC liquidity—and ultimately to each other.

In addition to the technologies already launched, Circle places exceptional emphasis on layers above the blockchain to make everything more user-friendly. These include:

• Arc Portal serves as the front door to the network: users can fund their wallets, exchange assets, discover applications, access yield opportunities, track balances, and fund proxy wallets.
• Arc Studio, as an AI programming agent, transforms a single prompt into application logic, smart contracts, and deployable code.
• App Kits bundle common operations such as payments, exchanges, deposits, cross-chain transfers, and earning rewards into ready-to-use SDKs, rather than requiring developers to piece together the entire flow themselves.

Together, these products aim to make Arc not only more accessible to crypto-native developers, but also lower the barrier for users, builders, and end agents interacting with this chain.

What’s next?

There is more to come on this chain overall, especially in the short term. Chandhok said Arc’s two main focuses in the initial months will be: 1. Privacy, 2. Proxy.

In terms of privacy, Circle is developing an optional privacy zone that allows users to hide their balances and transaction details while selectively disclosing information when necessary. The planned system runs private transactions in a trusted execution environment—a protected hardware isolation zone whose contents remain hidden even from Circle and Arc validators.

In terms of agency, Circle has laid some groundwork: USDC is becoming the primary currency for the emerging agency payment protocol x402, while it is also building its own agency stack, providing policy-controlled wallets and infrastructure that enable agents to discover services and pay for them.

The next step is to make these agents appear more like independent economic entities. Circle is working to implement verifiable agent identities and histories, reputation systems, and ultimately credit, so that an agent can prove what work it has done, earn money, hire another agent, or borrow based on its track record.

Larger Arc stake

This touches on perhaps the most important part of Circle’s thesis. Chandhok does not want Arc to simply siphon off USDC, DeFi, and users from Ethereum. As he said, moving existing activity from Ethereum to Arc does not actually expand Circle’s market.

The real stake lies in creating markets that barely exist today: agents paying and hiring each other, machine-scale credit, global stablecoin foreign exchange, tokenized assets reaching new buyers, and institutional activities that never enter a fully public ledger.

Arc faces significant competition. Tempo is entering the space from a payment infrastructure perspective, focusing on stablecoin payments and machine commerce, while Plasma is advancing further toward consumers with Plasma One. Arc has a broader strategy: targeting both the institutional market and the open crypto ecosystem, while also betting on autonomous agents becoming a new class of economic participants.

The question now is whether this will generate real new activity, or simply be another destination for existing crypto liquidity. To learn more about Circle’s outlook for the future, we recommend watching our full conversation with Chandhok—there’s still plenty more to dig into.

Source: www.kucoin.com