Circle Is Reshaping the Power Structure of Stablecoins

When people talk about stablecoins, the conversation has long revolved around three core issues:

• Issuance volume
• Backing assets
• Regulatory compliance

But Circle’s answer in 2026 has clearly moved beyond that framework.

Circle is no longer content simply issuing USDC. It is systematically pursuing something far more fundamental:
Transforming stablecoins from “assets deployed on public blockchains”
into “financial infrastructure controlled by Circle.”

Arc is the pivotal milestone in this strategy.

1. First, Let’s Clarify One Thing: Arc Is Not “Just Another Public Blockchain”

In press coverage, Arc is often simplistically described as:
“Circle’s institutional-grade Layer 1 blockchain.”

But placed in the context of Circle’s broader strategy, that description is woefully inadequate—and even misleading.

Arc’s true positioning is closer to:
A native stablecoin settlement layer + compliance enforcement environment + institutional payment operating system.

It is not designed to attract retail users, developers, or DeFi innovation. Instead, it solves a problem that traditional finance has always faced, yet public blockchains have never elegantly addressed:

• Deterministic settlement
• Controllable compliance execution
• Abstraction of cross-chain and multi-currency complexity

In other words:
Arc is not competing with Ethereum or Solana for “ecosystem share.”
It is redefining how stablecoins should actually be used.

2. Why Did Circle Decide to Build Its Own Chain?

This move reflects Circle’s sober assessment of the current public blockchain landscape.

① For Institutions, Using Public Chains Is Inherently Costly

From an institutional perspective, today’s major public chains have unavoidable drawbacks:

• Too many chains → complex risk and compliance boundaries
• Fragmented cross-chain experience → high operational overhead
• Gas fees, congestion, and MEV → unacceptable for payment use cases

For DeFi participants, these are “costs.”
For enterprises and banks, they are outright barriers.

② Circle’s Approach: Internalize the Complexity

Arc’s core philosophy can be summed in one sentence:
Institutions shouldn’t need to understand blockchain—they just need stablecoins to work.

Circle’s strategy is therefore not to educate institutions on how to choose chains, but rather to:

• Handle settlement finality on Arc
• Abstract cross-chain routing and bridging itself
• Deliver stablecoin payment capabilities via simple APIs

In this model:
“Which chain?” stops being an institutional decision.
“Whose stablecoin infrastructure?” becomes the real question.

Key technical features:

• Deterministic millisecond-level finality: Arc’s Malachite consensus engine achieves ~780 ms finality. Transactions are no longer probabilistically confirmed—they carry legal-weight deterministic settlement, comparable to SWIFT.
• Native USDC Gas: Arc eliminates the need for heterogeneous tokens (ETH, SOL, etc.). All fees are denominated directly in USDC, removing the accounting risk of holding volatile assets for enterprise CFOs.
• StableFX engine: Launched on Arc in 2026, StableFX enables 24/7 native hedging and instant exchange between USDC and regional stablecoins like EURC (digital euro) and BRLC (digital real), directly challenging traditional FX markets.

3. What Really Gets Disrupted After Arc Goes Live?

One point must be crystal clear:
Arc won’t immediately drain stablecoin balances from other chains.
What it takes is control over who finalizes, settles, and reconciles the money.

In short: the settlement sovereignty of stablecoins.

4. First-Tier Impact: Stablecoin Settlement-Focused Public Chains

① Solana

The most affected—but not replaced

Solana’s biggest success in recent years has been becoming the go-to chain for:

• High TPS
• Low gas
• Native USDC support

for stablecoin payments and transfers.

The problem: these are exactly the capabilities Arc wants to package and deliver.

For institutions:

• Using Solana → direct on-chain management required
• Using Arc → just integrate Circle’s payment APIs

Arc won’t hurt Solana’s DeFi, meme coin, or app ecosystem,
but it will significantly weaken its positioning as the “stablecoin payment chain.”

② Polygon

The most vulnerable in the settlement layer

Polygon’s institutional narrative has long centered on:

• Low cost
• Enterprise friendliness
• Widespread USDC usage

But Polygon does not control USDC issuance or settlement logic.

Once Circle offers:

• Native stablecoin settlement
• Cross-chain abstraction
• Built-in compliance environment

Polygon’s bargaining power in the stablecoin settlement layer will be sharply reduced.

③ Avalanche

Its subnet model is directly overlapped by Arc

Avalanche subnets are essentially:
“Custom execution environments for institutions.”

Arc can be understood as:
“A stablecoin-specific subnet + Circle-controlled + native compliance.”

For institutions:

• Building a custom Avalanche subnet
  vs.
• Directly using Circle’s Arc

Arc is simpler, cheaper, and offers clearer regulatory pathways.

5. Second-Tier Impact: Not Replaced, But “De-Paymentized”

④ Ethereum

Arc does not challenge Ethereum’s core value:

• Security
• Decentralization
• DeFi financial complexity

But it will gradually erode one role:
Direct enterprise USDC payments and settlements on Ethereum.

Result:

• Ethereum becomes more purely the financial/collateral layer
• Arc becomes the institutional payment and clearing layer

This is functional differentiation, not substitution.

⑤ Tron

Tron’s stablecoin settlement serves:

• Ultra-low cost
• Light compliance
• Retail and gray-market payment scenarios

Arc targets:

• Banks
• Public companies
• Multinational institutions

In the short term, Arc won’t steal Tron’s use cases.
In the long term, it sharpens the divide between compliant and non-compliant flows.

6. The Real Shift: Stablecoin Power Is Moving Upward

Connecting these changes reveals something profound:
Core control over stablecoins is shifting from public blockchains to issuers and settlement providers.

Past questions:

• Which chain is USDC on?
• Are gas fees high?
• Is TPS sufficient?

Future questions:

• Are you using Circle?
• Is settlement handled by Circle?
• Is cross-chain routing managed by Circle?

This is infrastructural power consolidation.

7. Quick Reference Table

8. Final Conclusion (Critical)

Arc is not here to “kill public chains.”
It is here to redefine:
Whose infrastructure stablecoins truly belong to.

• Public chains gradually retreat to the “execution and innovation layer.”
• Circle aims to occupy the “stablecoin settlement and experience layer.”

If this path succeeds:
When discussing stablecoins in the future, the first question won’t be “Which chain?”
It will be “Is it in the Circle ecosystem?”

This is a question we must take seriously—not for price speculation, but for understanding the endgame of stablecoin power structures.

Will Arc “Conditionally” Become the De Facto USDC Layer 1?

A Structural Judgment on Stablecoin Sovereignty

1. What Does “De Facto USDC Layer 1” Actually Mean?

To answer, we first need a shared definition.

“De facto USDC Layer 1” does not mean:

• USDC can only be issued on this chain
• Other chains lose USDC entirely
• All USDC migrates to one new chain

It means three things:

1. Where is the primary settlement anchor for USDC?
2. Which layer do institutions default to for USDC usage?
3. Who defines the user experience, compliance path, and cross-chain rules for USDC?

If the answers converge on one system—even if USDC exists on 20 chains—that system is the de facto Layer 1.

2. Why Arc Is Naturally Qualified as a USDC Layer 1 Candidate

① Circle Controls USDC’s Three Core Powers

Circle is not just another participant in public chain ecosystems. It holds the three most critical levers for USDC:

• Issuance (mint/burn)
• Compliance interfaces (KYC, sanctions, freezing)
• Institutional distribution channels (banks, payment firms, enterprises)

Arc is the first time Circle has unified these three in a single execution environment.
This creates a structural difference from other public chains.

② Arc Is a Chain Custom-Built for USDC

Most public chains follow:
Chain first → stablecoin later

Arc reverses the order:
Stablecoin (USDC) first → settlement layer designed around it

This allows:

• Gas, throughput, finality, account models

to be optimized purely for stablecoin payments and clearing—without compromises for DeFi, NFTs, or memes.

By design, Arc is USDC’s sovereign execution environment.

3. What Arc Really Wants to Replace Isn’t Ethereum—It’s the Need to “Choose a Chain”

A common Web3 reflex: “Will Arc kill Ethereum/Solana/Polygon?”

That’s the wrong frame.

Arc’s true target is eliminating this decision flow:
“I want to use USDC → Which chain should I pick? → How do I handle gas? → How do I bridge?”

Arc’s answer to institutions:
You don’t need to choose a chain.
You just use USDC.
The chain is Circle’s problem.

Once this model takes hold:

• Arc becomes the default landing point for USDC
• Other chains become execution layers, liquidity overflow layers, or application layers

4. How Arc Could Step-by-Step Solidify De Facto Layer 1 Status

We can break this into three phases.

Phase 1: Institutional payments and clearing default to Arc (high probability)
The easiest step with the least resistance.

If Circle achieves one thing—making institutions indifferent to which chain settles their USDC payments—then banks, payment firms, and multinationals will default to Arc at the experience layer.

Arc becomes the default settlement layer.

Phase 2: Authoritative USDC state originates on Arc (medium probability)
The deeper structural shift:

• Which chain’s USDC state is considered final and legally trustworthy?
• Which chain offers compliance-grade settlement certainty?

If the answer is Arc, then USDC on other chains effectively becomes mapped extensions or execution copies of Arc’s state.

Arc ≈ sovereign ledger for USDC
Other chains ≈ environments that use USDC

Phase 3: Advanced USDC capabilities exist fully only on Arc (medium-low probability, but decisive)
Examples:

• Institutional-grade compliant settlement
• Native multi-currency swaps (USDC/EURC/USYC)
• Legal-event state rollback/auditability
• Advanced permission controls and finality

If these are either exclusive to Arc or significantly superior there, the market will passively recognize Arc as the de facto USDC Layer 1.

5. But Why Arc Will Not Become the Only USDC Layer 1

This second half is equally important.

① Circle Has No Incentive to Close Off USDC

USDC’s moat comes from:

• Broad distribution
• Multi-chain accessibility
• Deep ecosystem embedding

Forcing USDC exclusively onto Arc would destroy network effects.
Circle will never do that.

② DeFi and Permissionless Finance Cannot Live Solely on Arc

Arc is designed for:

• Compliance
• Institutional friendliness
• Clear permissions

High-risk DeFi and permissionless innovation are inherently unsuited to it.

Therefore:

• Ethereum remains USDC’s financial experimentation ground
• Solana remains USDC’s high-frequency application field
• Tron remains the gray-market settlement field for USDT/USDC

Arc neither needs nor wants to replace these.

6. True Conclusion: Arc = USDC’s “Sovereign Layer,” Not Its “Ecosystem Layer”

Combining everything, the most accurate judgment is:
Arc will become USDC’s sovereign settlement layer and default gateway—not its sole runtime environment.

More bluntly:
Which chain USDC runs on doesn’t matter.
Who USDC ultimately answers to does.

Arc is Circle’s tool for answering that question.

7. One-Sentence Summary

Arc’s real significance is not adding another chain,
but giving USDC—for the first time—its own sovereign Layer 1.

If this path succeeds, stablecoins will evolve from
“assets dependent on public chains”
into
“financial infrastructure with independent settlement sovereignty.”

FAQ Quick Reference

Q: After Arc launches, will USDC on Ethereum become invalid?
A: Absolutely not. Circle positions Arc as a “liquidity hub” via CCTP (Cross-Chain Transfer Protocol). USDC will continue flowing to every chain like blood, but Arc is the “heart”—handling final ledger settlement and fiat redemption audits.

**Q: Will Arc actually issue a native token $ARC?** A: Circle’s Q1 2026 earnings indicated exploration of an $ARC token. Its likely role is not gas (already USDC) but governance and node staking—signaling a potential transition from a single corporate entity to a decentralized clearing network.

Q: Why does Tron remain rock-solid in this shift?
A: Because Arc and Tron serve entirely different constituencies. Arc is “bright-dollar” money (compliant, institutional, regulated). Tron carries “gray liquidity” (global trade, retail transfers, censorship resistance). Arc’s arrival actually sharpens the boundary between the two.