Circle’s (CRCL) upcoming launch of the Arc blockchain and its $222 million token presale to cryptocurrency investors raises a broader question: Should Circle be viewed primarily as a stablecoin issuer, or as an infrastructure company building a trajectory for digital finance?
In addition to this week’s quarterly earnings, the company also announced a major funding round for Arc ahead of its planned summer launch, valuing the network at around $3 billion, with investors including a16z crypto, Apollo, BlackRock and ARK Invest.
While the earnings results were mixed, the news sparked a strong reaction from investors, with Circle shares soaring more than 15% on Monday, suggesting the launch of the product addresses a critical compliance gap on Wall Street.
“We believe we have built one of the most institutionally prepared networks in the world,” Allaire explained during the earnings call. He described Arc as a system designed to be operated by financial institutions with “the trust required of the global economic infrastructure.”
While the move was cheered by the market and some analysts, including Clear Street’s Owen Lau, who called Arc a “second growth engine” for USDC issuers, questions remain about the valuation of Circle stock relative to the Arc token and the growing competition.
The move also comes as Congress advances stablecoin legislation that could eventually allow banks, fintechs and payments companies to issue their own digital dollars. This prospect has led some investors to question whether stablecoins themselves will become commoditized over time.
What is an arc?
Arc Chain, which has been in beta mode since October and is scheduled to go live this summer, is Circle’s attempt to expand its stablecoin business to a broader infrastructure layer.
During the company’s earnings call on Monday, CEO Jeremy Allaire positioned Arc as an “economic operating system” designed for payments companies, asset issuers and capital markets.
“We built a highway for USDC,” Allaire said on the earnings call. “Now we are opening it up to other stablecoin and real-world asset issuers.”
The idea, he said, is to make stablecoins and tokenized assets more easily liquid while maintaining the levels of control, compliance and reliability expected by large financial players. He added that the chain was also built to prepare AI agents to make inroads in the financial sector.
Allaire’s comments are indicative of where the stablecoin industry is headed. The industry’s market capitalization hit an all-time high, exceeding $320 billion. Almost every cryptocurrency or traditional company is building stablecoins or Rails to serve the industry and tout more efficient and cheaper alternatives to traditional systems. A16z, a major investor in Arc’s financing, said that stablecoins are becoming “one of the most important tools in global finance,” which is perhaps appropriate.
However, the venture capital firm noted that the underlying blockchain infrastructure remains fragmented and is largely optimized for cryptocurrency native users rather than banks and enterprises. According to a16z, this is where Arc comes in, and the company says it aims to bridge this gap, offering fast settlements, configurable privacy and known validators, as well as features that are more compliant with institutional requirements.
“As the world’s finance moves on-chain, we believe that a handful of blockchain networks will collectively become the new backbone of the financial system,” a16z partners Ali Yahya and Noah Levine wrote. “Arc has the ability to be one of them,” they added.
Circle Stock and Arc Token
However, given Arc’s token pre-sale, questions remain about how Arc will impact Circle’s valuation in the long term: Why would people buy shares if they can buy tokens now?
For Clear Street’s Liu, they are “two completely different concepts.”
He described Arc as an infrastructure layer and USDC as an application running on top of it. “You have one more tunnel that your application can run on. It just means you have more channels, more opportunities to scale your USDC,” Lau said in an interview with CoinDesk.
Lau compared Arc to Ethereum or Solana — first-layer blockchains that support applications, payments and tokenized assets. In a report earlier on Monday, he believed the network could enhance USDC adoption, especially as Circle moves into AI-powered payments, tokenized finance and commercial settlement systems.
Still, Liu acknowledged that Arc remains highly speculative, at least for now.
“It depends on network activity,” he said. “We still don’t know which applications will actually run on Arc.” For now, he sees Arc as “option value” rather than a tangible contribution to Circle’s business.
Compass Point analyst Ed Engel was similarly cautious, warning investors not to place too much value on the project until a meaningful use emerges.
“We would rather wait for Arc to generate meaningful trading activity before assigning value to the ARC token,” Engel wrote in a research note on Monday. Crypto venture capital firms have long backed blockchain projects at high valuations, but token prices have fallen after launch, he added.
The economics behind Arc remain another open question.
Circle said fees on the network could be denominated in stablecoins while still adding value to the ARC token through validator rewards and token burning. Analysts say the structure is similar to Ethereum’s model, where network activity drives demand for the underlying token.
Liu said the pre-sale valuation of $3 billion seemed credible given the capabilities of the institutional investors involved. “I don’t think it’s crazy,” he said. For now, Arc’s importance may lie less in what it produces today than in the signal it sends about Circle’s future ambitions.
‘Competition is fierce’
The disagreement over what to buy: tokens or shares highlights a core debate currently emerging around Circle and the stablecoin industry: whether having the blockchain infrastructure becomes more important as digital dollar issuance itself becomes more competitive.
Digital asset investment bank FRNT said that on the one hand, with the launch of Arc, existing networks will face increasingly fierce competition. “As solutions such as Arc continue to mature, existing networks will face stiff competition,” the company wrote in a report.
On the other hand, Clear Street’s Lau said the industry is dominated by Tether’s USDT and Circle’s USDC, while other stablecoins such as PayPal have not gained market share. But now, Circle’s addition of Arc will bring new competitive pressures, he added.
By launching its own blockchain, Circle is no longer just a customer of crypto infrastructure providers like Ethereum and Solana. Lau said Arc now competes directly with these networks and possibly Coinbase’s Base blockchain.
Despite questions about valuation and long-term competitive implications, Arc’s launch fits a pattern of cryptocurrency development increasingly shifting its focus to large financial institutions and Wall Street rather than retail users.
Tempo, incubated by payments giant Stripe and investment firm Paradigm, raised $500 million in October at a $5 billion valuation to launch a payments-centric blockchain. Digital Asset, the developer of Canton Network, has attracted support from Goldman Sachs, DRW, Citadel Securities, Bank of New York and Nasdaq, and is reportedly raising an additional $300 million at a $2 billion valuation.
Arc’s fundraising is another example of big-money investors betting that big financial firms are increasingly looking to design blockchain infrastructure around how institutions actually move money (cross-border payments, treasury management, foreign exchange and tokenized assets) rather than the open, retail-first systems that cryptocurrencies originally were. Circle is betting all-in on Arc and this trend.
