Written by: David, TechFlow
On August 12th, on the same day it released its first post-IPO financial report, Circle dropped a bombshell: Arc, an L1 blockchain specifically built for stablecoin finance.
If you only look at the news headline, you might think this is just another ordinary public chain story.
But when you interpret it within Circle's trajectory over the past seven years, you'll discover:
This is not just a public chain, this is a territorial declaration about a "digital central bank".
Traditionally, central banks have three main functions: issuing currency, managing payment clearing systems, and formulating monetary policies.
Circle is gradually completing a digital replication - first securing the "coinage right" with USDC, then building a clearing system with Arc, and next, perhaps formulating digital currency policies.
This is not just about one company, but about the redistribution of monetary power in the digital era.
[The rest of the translation follows the same principles, maintaining the specified translations for specific terms]Circle's answer is not to migrate, but to supplement. Arc is not meant to replace USDC on Ethereum, but to provide solutions for use cases that existing public chains cannot satisfy. For example, enterprise payments requiring privacy, foreign exchange transactions needing instant settlement, and on-chain applications with predictable costs.
This is a bold bet. If successful, Circle will become the "Federal Reserve" of digital finance; if it fails, billions of dollars invested might go to waste.
PayPal's approach is pragmatic and flexible.
In 2023, PYUSD was first launched on Ethereum, expanded to Solana in 2024, went live on the Stellar network in 2025, and recently covered Arbitrum.
PayPal did not build a dedicated public chain, but instead deployed PYUSD flexibly across multiple available ecosystems, with each chain serving as a distribution channel.
In the early stages of stablecoins, distribution channels are indeed more important than building infrastructure. Why build your own when ready options exist?
Capture user mindshare and usage scenarios first, and consider infrastructure issues later, especially since PayPal has a merchant network of 20 million.
Tether is like the de facto "shadow central bank" of the crypto world.
It barely intervenes in USDT usage, releasing it like cash, with circulation determined by the market. Especially in regions with unclear regulation and difficult KYC, USDT becomes the only choice.
Circle founder Paolo Ardoino once stated in an interview that USDT primarily serves emerging markets (such as Latin America, Africa, Southeast Asia), helping local users bypass inefficient financial infrastructure, more like an international stablecoin.
With 3-5 times more trading pairs than USDC on most exchanges, Tether has formed a powerful liquidity network effect.
Most interestingly, Tether's attitude towards new chains is to not actively build, but support others' construction. For example, supporting stablecoin-specific chains like Plasma and Stable. It's like placing a bet, maintaining presence in various ecosystems at minimal cost, to see which one emerges.
In 2024, Tether's profits exceeded $10 billion, surpassing many traditional banks; instead of using these profits to create its own chain, it continued buying government bonds and Bitcoin.
Tether's bet is that as long as it maintains sufficient reserves and avoids systemic risks, inertia will maintain USDT's dominant position in stablecoin circulation.
These three models represent different predictions about the future of stablecoins.
PayPal believes in user supremacy. With 20 million merchants, technical architecture is secondary. This is internet thinking.
Tether believes in liquidity supremacy. As long as USDT remains the basic trading currency, nothing else matters. This is exchange thinking.
Circle believes in infrastructure supremacy. Control the track, and you control the future. This is central bank thinking.
The reason for this choice might be from Circle CEO Jeremy Allaire's congressional testimony: "The dollar is at a crossroads, and monetary competition is now a technological competition."
Circle sees more than just the stablecoin market, but the standard-setting rights for digital dollars. If Arc succeeds, it could become the "Federal Reserve System" of digital dollars. This vision is worth the risk.
2026: Critical Time Window
The time window is narrowing. With regulation advancing and competition intensifying, when Circle announced Arc would launch its mainnet in 2026, the crypto community's first reaction was:
Too slow.
In an industry that values "rapid iteration", taking nearly a year from testnet to mainnet seems like missing an opportunity.
But if you understand Circle's situation, this timeline isn't bad.
On June 17th, the U.S. Senate passed the GENIUS Act. This is the first federal-level stablecoin regulatory framework.
For Circle, this is a long-awaited "recognition". As the most compliant stablecoin issuer, Circle has almost met all GENIUS Act requirements.
2026 is precisely when these regulations will be implemented and the market will adapt to new rules. Circle doesn't want to be the first to take risks, but also doesn't want to arrive too late.
Enterprise customers value certainty most, and Arc provides exactly that—certain regulatory status, certain technical performance, certain business model.
If Arc successfully launches and attracts sufficient users and liquidity, Circle will establish its leadership in stablecoin infrastructure. This could usher in a new era where a private company operates like a "central bank".
If Arc performs poorly or is overtaken by competitors, Circle might have to rethink its positioning. Perhaps ultimately, stablecoin issuers can only be issuers, not infrastructure leaders.
But regardless of the outcome, Circle's attempt is pushing the entire industry to think about a fundamental question: In the digital age, who should control monetary power?
The answer to this question might become clearer in early 2026.
