Circle’s Arc: Same Old Strategy in a Shinier Box
Circle’s “open L1 for stablecoin finance” is built to control the rails when yield goes away. Here’s what the Arc litepaper actually says......
Circle just announced their latest brainchild: Arc, a new Layer 1 blockchain built for “stablecoin finance.”
Here’s what they want you to believe: Arc is the missing infrastructure for the future of finance. It comes with sub-second finality, dollar-denominated gas fees, privacy options for enterprises, native USDC support, and integration with Circle’s full stack.
Here’s what they’re not saying: This is a desperate attempt to avoid irrelevance.
Circle is a company that builds for compliance officers, brand consultants, and whatever banking partner they’re trying to impress that week. That’s fine, but don’t confuse it with building the kind of infrastructure that actually survives onchain and is meant for users.
When rates drop; and they will, what’s left of Circle’s entire revenue model? They don’t have the reach. They don’t have the trust of actual crypto users. They’ve spent more time lobbying Congress than shipping anything users actually want.
Arc isn’t here to serve users. It’s here to make Circle more palatable to public markets. It’s a brochure chain. A proof-of-concept built for boardrooms.
Contrast that with Tether, a company that everyone loves to hate, yet has managed to embed itself in real-world markets everywhere, from Nigeria to Argentina to Turkey to Ukraine. Tether sometimes is a little messy. It’s definitely not always polite. But it works and it’s used by the world; it’s why I call it “The People’s Project”. It moves value at the edges of the global financial system where banks fail, where regulators waffle, and where people still need dollars.
You can criticize their audits. But you can’t say they don’t have product-market fit.
Arc might impress a few institutions or analysts who have just discovered MetaMask in the last year. But it won’t win the stablecoin war.
Because the war isn’t about who can write the most compliant whitepaper. It’s about who people actually trust when the banks are closed, when inflation bites, and when you need dollars fast.
And so far, Circle hasn’t shown up to that fight. Not once.
Breaking down the litepaper: what’s solid, what’s squishy
1. “Decentralization,” redefined
Arc’s validators are permissioned institutions. The paper argues this is a new kind of decentralization; spread across big, global entities. In practice, that’s a country club, not open membership. It may fit bank policy and compliance, but it concentrates gatekeeping and turns validators into policy levers.
2. The speed numbers leave out the hard part
Those fancy TPS/latency charts exclude EVM execution. Consensus-only latencies are always pretty; real apps pay for execution, storage, gas auctions, and integration. Arc will still be fast, but the headline claims aren’t end-to-end. The paper says this quite plainly actually.
3. Privacy is a promise, not a feature (yet)
“Confidential transfers” start by hiding amounts, not addresses. Auditors get view keys and the compute trust sits on TEEs, which moves trust to hardware vendors and enclave supply chains. ZK/MPC/FHE come “later.” If you need production-grade private finance on day one, this isn’t that. But thanks for the roadmap.
4. MEV mitigation is also a promise
The paper splits MEV into good (arbitrage keeps stablecoin FX tight) and bad (sandwich/front-run at the till). Mitigations, encrypted mempools, batch processing, and multi-proposers are planned, but not live. Thanks for the roadmap.
5. Fees fund an Arc Treasury
Fees are deposited into an on-chain Arc Treasury at launch. Who steers it? Under what policy? With a permissioned validator set selected by institutions, rent collection and rule-making sit closely together. You could argue that users inherit the policy risk. But time will tell ofcourse.
6. “Open” rails with a house currency
USDC as gas makes accounting clean and UX familiar for CFOs; it also anchors the chain to Circle’s instruments and controls. Yes, a paymaster can accept other stablecoins, but the native cash register is USDC.
7. Cross-chain as a distribution moat
Arc’s “burn-here, mint-there” pitch leans on CCTP which is ofcourse efficient for USDC. The paper says they aim to extend utility to other stablecoins, but the fast path is built around Circle’s mint/burn flow. Liquidity gravity will follow the shortest path.
8. The big reveal
This line from the architecture section is the tell: “a permissioned set of validators… institutional-grade… tailored for regulated financial applications.” That’s a bank-grade chain Circle can govern with big-name partners. It’s not built to be ownerless; it’s built to be acceptable to large institutions and regulators, on Circle’s terms.
So where does this leave Tether?
Tether already won distribution and liquidity where it counts: offshore venues, OTC desks, and dollar-hungry markets outside neat compliance boxes. It’s chain-agnostic and plugged into the places people actually move value.
Circle builds for boards and regulators; Tether is used by the street.
Who should pick what?
Pick Arc if you need a named counterparty, bank-grade audit trails, dollar-denominated fees, opt-in disclosure with view keys, vendor support, and a curated validator set your risk team can underwrite. You’re buying assurances and a change process that sits with Circle and partners.
Pick USDT on open rails if you need reach across CEX/P2P/OTC, instant settlement on many chains, balls deep liquidity in dollar-hungry markets, and minimal friction for counterparties outside U.S. policy boxes. You’re buying distribution and speed, and you accept ongoing debates about disclosure and uneven policy treatment by region.
These are different buyers and different jobs. Arc is for regulated flow inside the fence. USDT moves dollars in the open. Both can do well. One will win.
I love stablecoins, Tether in particular, and I will be writing about the ongoing and ever-increasing future stablecoin war. Stay tuned for insights, drama, and analysis as it all unfolds.
P.S. In case you didn’t realize, I am not Patrick Hansen.