The competition for stablecoin infrastructure has ignited this scorching summer. Giants like Tether, Circle, and Stripe have all begun developing their own blockchains, aiming to evolve from simple on-chain payment tools into enterprise-grade financial infrastructures. In this new battleground, payment experience, liquidity, and regulatory compliance will become key differentiators.

Circle to Launch L1 with Optional Privacy Features
On August 12, Circle released its first post-IPO financial report. Despite a net loss of over $480 million due to non-cash IPO-related expenses, the company demonstrated robust growth, with revenue up 53% year-over-year and USDC circulation surging 90%.

With the U.S. stablecoin bill GENIUS now in effect, the stablecoin industry has reached a historic inflection point, offering expanded growth opportunities. However, as more traditional financial institutions enter the market, competition is intensifying. Circle is now setting its sights on stablecoin payment infrastructure to diversify its revenue streams.

During its earnings announcement, Circle revealed plans to launch Arc, an open Layer 1 blockchain designed for native stablecoin applications. Arc aims to balance efficiency, compliance, and developer-friendliness to meet the stringent demands of enterprise finance.

"Arc marks a pivotal moment in our mission to build a full-stack internet financial system. It combines the stability of stablecoins with the openness of blockchain, providing a trusted, high-performance platform for businesses, developers, and financial institutions to usher in the era of programmable money," said Circle CEO Jeremy Allaire.

Positioned as an operating system for global financial innovation, Arc supports core applications like cross-border payments, on-chain credit, and capital market settlements. It also enables secure, automated transactions for machines, systems, and AI agents, facilitating complex financial scenarios such as real-time treasury management, supply chain finance, and automated treasury operations.

According to official details, Arc is built on Malachite, a high-performance consensus engine developed by Informal Systems. It employs 4 to 20 regulated, geographically distributed validators to achieve sub-second transaction finality (under 100–350 ms), catering to high-value financial use cases like cross-border payments and capital market settlements.

As an EVM-compatible blockchain, Arc allows developers to leverage existing ecosystems and tools to build and deploy diverse stablecoin financial products. Its consensus design resembles a permissioned consortium chain—a regulatory-friendly architecture with controlled node access.

Arc uses USDC as its native gas token and adopts a dynamic fee market similar to Ethereum’s EIP-1559, offering low, predictable dollar-denominated fees. This addresses enterprises' reluctance to hold volatile crypto assets for gas payments. Beyond USDC, Arc plans to support EURC, tokenized short-term treasury funds (USYC), and other tokenized currencies via Paymaster, lowering barriers for multi-currency markets.

Additionally, Arc integrates an institutional-grade RFQ-based forex engine for instant, 24/7 stablecoin settlements and price discovery. It also offers optional privacy features (e.g., hiding transaction amounts while revealing addresses) to help businesses comply with sensitive data regulations. Deep integration with Circle’s product suite positions Arc as a stablecoin financial hub.

Arc’s private testnet is expected to launch in the coming weeks, with a public testnet slated for fall 2025 and a mainnet beta in 2026.

Multiple Players Join the Fray: Stablecoin-Specific Chains Gain Momentum
Circle isn’t the first stablecoin issuer to venture into blockchain development.

"Some companies’ strategies resemble moths flying into flames," quipped Tether CEO Paolo Ardoino in a thinly veiled jab at Circle after its L1 announcement.

As the world’s largest stablecoin issuer, Tether has already launched Plasma and Stable, two blockchains optimized for stablecoins. These chains feature zero-fee transactions, high throughput, and dedicated stablecoin infrastructure to accelerate USDT’s global payment and settlement adoption.

Stable, like Arc, is an institutional-focused, EVM-compatible L1 chain aiming to replace general-purpose blockchains in cross-border payments and compliance scenarios. However, the two differ significantly in fee structures, target markets, compliance frameworks, transparency, and technical architectures.

For example:

• Fees & Gas: Stable uses USDT as its native gas token, offering zero-fee P2P transfers and dollar-denominated smart contracts—ideal for retail users and institutional micro-payments. Arc supports multiple stablecoins (USDC, EURC) and integrates Circle’s forex services and cross-chain protocols, catering to institutions needing multi-currency liquidity.

• Compliance & Transparency: Arc leverages Circle’s U.S. regulatory compliance, with USDC reserves 100% backed by cash and U.S. Treasuries, audited monthly by Big Four firms. Stable relies on Tether’s market dominance but holds riskier assets, limiting its appeal in tightly regulated markets despite higher profitability.

• Progress & Funding: Stable’s testnet is live, backed by a $28M seed round led by Bitfinex and Hack VC. Arc hasn’t launched its testnet but benefits from Coinbase and BlackRock’s support.

This L1 stablecoin war isn’t limited to crypto-native firms. Fintech titan Stripe is reportedly collaborating with Paradigm to develop Tempo, a payment-focused L1 chain compatible with Ethereum’s programming language. Though still in stealth mode with a five-person team, Stripe’s acquisitions—including a $1.1B buyout of stablecoin infrastructure firm Bridge and wallet developer Privy—signal ambitions to build an end-to-end crypto payment stack.

The rise of stablecoin-specific chains may attract more participants. Previously, stablecoins relied on general-purpose chains like Ethereum and Tron, lacking networks tailored for payments, settlements, and compliance. As stablecoins enter mainstream finance, more institutions may roll out proprietary chains—though building L1s from scratch entails technical, regulatory, and liquidity challenges. Alternatively, some may opt for L2 solutions on established chains, trading some autonomy for faster ecosystem access and lower risk.