CoinW Research Institute

Arc is not another general-purpose public chain pursuing high TPS, but a comprehensive upgrade Circle attempts to unify the issuance, cross-chain, payment, institutional settlement, regulatory privacy, and AI Agent payments of USDC onto the same execution layer. If the core of the last round of stablecoin competition was "who issued more dollar assets," the next phase represented by Arc may be "who controls the settlement layer of stablecoin liquidity."

1. Project Overview

Arc is a stablecoin native Layer1 public chain that was first disclosed by Circle in August 2025, with the mainnet whitepaper officially released on May 11, 2026. The mainnet is planned to go live this summer. Arc uses USDC as its native Gas token, focusing on sub-second final confirmation, an embedded foreign exchange settlement engine, and a protocol-level compliance framework, employing the Malachite consensus engine for higher throughput. Arc is the core vehicle for Circle to upgrade itself from USDC issuer to a stablecoin settlement layer operator.

The launch of Arc is deeply tied to Circle's capital trajectory. Circle completed its IPO (stock code CRCL) on the NYSE in June 2025, and the market valuation for Circle has risen to approximately $30 billion post-listing. Arc serves as the core infrastructure supporting this valuation anchor, emphasizing bringing real financial activities on-chain, including cross-border payments, stablecoin foreign exchange, asset tokenization, lending, fund management, capital market settlement, and future small automatic payments between AI Agents.

Unlike most Layer1 projects that focus on building an ecosystem first, Arc's approach is reversed; Circle already has USDC, the world's second-largest stablecoin network, and is now supplementing it with a dedicated settlement chain. If the core of the last round of stablecoin competition was "who issued more dollar assets," the next phase represented by Arc is "who controls the default infrastructure for stablecoin liquidity."

2. Team Background

Arc is led by Circle Internet Group. Circle was founded by Jeremy Allaire and Sean Neville in 2013 and is the issuer of the world's largest compliant dollar stablecoin USDC. As of May 2026, the circulating supply of USDC is approximately $76 billion, and its market share in stablecoins is second only to USDT. The core team at Circle has extensive experience in compliance, clearing, and traditional financial infrastructure; CEO Jeremy Allaire has long participated in discussions around US stablecoin regulation and the EU MiCA policies, which also places a greater emphasis on compliance, auditability, and institutional adaptability in Arc's underlying architecture design.

The recent surge in Arc's popularity is directly catalyzed by two events on May 11. First, Circle disclosed the ARC token private placement in its Q1 2026 financial report, with a fundraising amount of $222 million, corresponding to an Arc network FDV of $3 billion. Participants include leading institutions such as a16z, BlackRock, and Apollo Funds. Second, Circle released the ARC whitepaper, systematically outlining the token economic model and expecting the mainnet to go live in the summer of 2026. The public testnet for Arc was already online in October 2025, with partners including BlackRock, Visa, Mastercard, and AWS. According to the Arc whitepaper, by early May, the Arc testnet had processed approximately 244 million transactions.

3. Main Advantages of ARC

USDC Native Gas and Sub-second Settlement

Arc uses USDC as its native Gas token, reducing budget uncertainties caused by Gas price fluctuations for enterprise users. Developers do not need to hold volatile assets for the infrastructure layer, allowing enterprise users to complete financial accounting directly in stablecoins. In terms of settlement, Arc provides sub-second determinism aimed at payment and financial settlement scenarios.

Optional Privacy, EVM Compatibility, and Protocol-Level Compliance

Arc maintains EVM compatibility, significantly lowering the migration cost for developers; it also supports optional privacy, balancing on-chain transparency with financial-grade data protection. Its compliance framework is embedded at the protocol level, natively supporting account permissions, sanction list verification, and institutional KYC labels, and introducing privacy technologies such as zero-knowledge proofs (ZK) to allow both parties in a transaction to selectively disclose transaction amounts, account relationships, or business data while meeting regulatory audit requirements.

This design, which is auditable yet not excessively public, aligns with the dual needs for data compliance and business privacy from financial institutions, payment companies, and RWA scenarios, and is one of the key features distinguishing Arc from general Layer1 solutions.

Institutional-Level Stablecoin Infrastructure and AI Agent Payment Network

Arc's positioning goes beyond being a stablecoin settlement chain; it aims to construct a new generation of stablecoin financial infrastructure for institutional scenarios. It natively integrates Circle's USDC, institutional-grade deposit and withdrawal channels, and developer tools, enabling financial institutions, payment service providers, and stablecoin issuers to execute fund scheduling and compliance settlements within a unified framework, thus reducing the integration and operational complexity brought by multi-layered intermediate infrastructure.

Meanwhile, Arc is attempting to extend stablecoin payment infrastructure to AI Agent economic scenarios. Circle is advancing the construction of financial infrastructure aimed at the Agentic Economy and is exploring the stablecoin payment capabilities of AI Agents in collaboration with ecosystem participants such as AWS, with the goal of enabling AI Agents to automatically complete micro-payment processes such as API calls, data access, computing power procurement, and service settlement based on USDC, thus promoting a new application scenario for machine-to-machine payments based on stablecoins.

4. ARC's Token Economics

The initial total supply of ARC is 10 billion tokens, with the distribution structure being: 60% for the ecosystem (used for token sales, developer funding, network growth, ecosystem incentives), 25% for Circle (protocol development, operational support, validator infrastructure, governance participation), and 15% for long-term reserves (strategic flexibility, systemic risk buffer, long-term ecological stability). Notably, the whitepaper states that ARC does not represent equity, debt, or rights to profits from Circle, nor does it constitute any claim to Circle's assets or profits.

The main functions of ARC include staking, governance, fee capture, platform-level benefits, and ecosystem coordination. Of particular interest is its fee mechanism, whereby Arc users can pay protocol fees with assets such as USDC, but the protocol layer will convert the fees uniformly into ARC, with part distributed to validators and stakers and another part permanently destroyed to offset inflation. The initial annual inflation of ARC is around 2%-3%, gradually decreasing as the network develops; the long-term goal is to achieve inflation neutrality under supply-demand balance through the fee return and burn mechanisms generated by network usage.

5. How to Participate and Interact

First, users can claim Arc test tokens through the Circle Faucet for subsequent interactions on the testnet. Developers can further review the Arc Docs, where the official documentation has already provided connection instructions for Arc test RPC, contract deployment, using USDC to pay Gas, sending stablecoins, cross-chain bridges, and more.

Meanwhile, the Arc ecosystem has also opened an application channel for project teams through Circle Developer Grants. This program mainly targets teams building on Arc and the Circle Developer Platform, focusing on supporting AI Agent payments, P2P payments, fund management, and other directions. Selected projects have the opportunity to receive USDC funding, joint marketing, technical support, and resources from the Circle ecosystem.

Ordinary users can also participate in Arc’s official community tasks. Users can enter the Arc Community to register and validate through Google Email or LinkedIn accounts. The activity divides levels based on points; the higher the level, the theoretically higher priority one may have for future activities like new launches, whitelists, or airdrops. From a participation strategy perspective, ordinary users can prioritize completing tasks such as daily activity, reading content, watching videos, commenting, replying, and posting to continuously improve their level; users with content capabilities or community resources can try publishing high-quality articles, participating in video sharing, or engaging in offline activities to earn higher points. Additionally, users can join the official Discord to keep an eye on early identity roles, ecosystem activities, and subsequent testnet tasks.

6. Competitive Landscape

Arc is pushing Circle from a company relying on stablecoin issuance and reserve income towards a settlement network, developer entrance, and infrastructure platform for institutional on-chain operations. The past growth of USDC mainly came from the expansion of circulation scale and reserve interest income in the US's high-interest rate environment; the second growth curve provided by Arc extends USDC from on-chain dollars to enterprise payments, RWA settlements, cross-chain liquidity, and AI Agent micro-payments at the execution layer.

However, Arc's competitive advantage also comes with two types of risks.

• First, there exists tension between centralization and neutrality. Early on, Arc is led by Circle in upgrades, security responses, and validator management; institutions may prefer this trusted governance, but crypto-native users may question its neutrality.
• Second, while USDC as Gas enhances user experience, it also weakens the direct demand for holding ARC, making the value capture of ARC more dependent on fee conversions, staking, and destruction. Therefore, the CoinW Research Institute believes that assessing ARC should consider not only conventional metrics like daily active addresses but also real fee scale, USDC settlement scale, the number of institutional applications launched, and destruction coverage rate.

For users, participating in ARC can be split into two paths: indirect observation and direct engagement. From an indirect observation perspective, CRCL stock can serve as a window to observe Circle's overall business, but it is also influenced by the US stock market, performance, interest rates, and regulatory expectations. Users can monitor indicators like CRCL market capitalization and stock price's retracement relative to the post-IPO peak. For direct participation, users will need to wait for public sales after the ARC mainnet launch; currently, users can participate in the early ecosystem through the official community, testnet interactions, and more. With Circle disclosing the ARC token private placement under its presence as a listed company, it is essentially exploring a new way to parallel finance through "equity + token" under the current framework. If this model is successfully established, it may provide practical references for future compliant institutions issuing tokens.

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