Circle’s upcoming Arc blockchain (CRCL) and its $222 million token presale raise a broader question for crypto investors: Should Circle still be valued primarily as a stablecoin issuer or as an infrastructure company building the rails of digital finance?
Alongside its quarterly results this week, the company announced a major fundraising round for Arc ahead of a planned summer launch, valuing the network at around $3 billion backed by investors including a16z crypto, Apollo, BlackRock and ARK Invest.
Although the financial results were mixed, the news resonated well with investors, as Circle shares jumped more than 15% on Monday, suggesting the launch closes a critical compliance gap for Wall Street.
“We have built what we believe to be one of the most institutional networks in the world,” Allaire explained during the earnings conference call, describing Arc as a system designed to be operated by financial institutions with “the trust required for global economic infrastructure.”
While the move was welcomed by the market and some analysts, including Clear Street’s Owen Lau, who called Arc a “second growth engine” for the USDC issuer, questions remain about the valuation of Circle’s shares relative to Arc’s token, as well as 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 wonder whether stablecoins themselves could become a commodity over time.
What is Arc?
The Arc Chain, in test mode since October and 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 conference call Monday, CEO Jeremy Allaire introduced Arc as an “economic operating system” designed for payments companies, asset issuers and capital markets.
“We built the highways for USDC,” Allaire said during the earnings conference call. “We are now opening them up to other issuers of stablecoins and real-world assets.”
The idea, he said, is to make it easier to move stablecoins and tokenized assets, while maintaining the level of control, compliance and reliability expected by large financial players. The chain is also being built to be ready for AI agents to gain traction in finance, he added.
Allaire’s comments are signs of the direction the stablecoin industry is heading. The sector’s market capitalization has reached a record level, exceeding $320 billion. Almost every crypto or traditional company is building a stablecoin or rails to service the industry, touting a more efficient and lower cost alternative to existing systems. A16z, lead investor in Arc’s fundraising, perhaps put it rightly when he said that stablecoins are becoming “one of the most important tools for global finance.”
However, the venture capital firm noted that the underlying blockchain infrastructure remains fragmented and is largely optimized for crypto-native users rather than banks and corporations. According to a16z, this is where Arc comes in, aiming to fill this gap, by offering rapid settlement, configurable privacy and known validators, features that more closely match institutional requirements, the company said.
“As global finance evolves on-chain, we believe that a handful of blockchain networks will emerge together as the new backbone of the financial system,” wrote a16z partners Ali Yahya and Noah Levine. “Arc is in a strong position to become one of them,” they added.
Circle shares vs Arc token
However, given the presale of Arc’s token, questions remain about how Arc affects Circle’s valuation in the long term: why should anyone buy the shares if they can buy the token now?
For Clear Street’s Lau, these are “two very different concepts.”
He described Arc as the infrastructure layer while USDC functions as an application running on top. “You have an additional tunnel that your applications can run on. It just means you have more channels, more opportunities to expand your USDC in the future,” Lau told CoinDesk in an interview.
Lau compared Arc to Ethereum or Solana – layer 1 blockchains that support applications, payments and tokenized assets. In a note earlier Monday, he argued that the network could boost USDC adoption, especially as Circle moves into AI-based payments, tokenized finance, and trade settlement systems.
Still, Lau acknowledged that Arc remains highly speculative, at least for now.
“It depends on network activity,” he explained. “We still don’t know which applications will actually run on Arc.” For now, he views Arc as an “option value” rather than a tangible contributor to Circle’s business.
That caution is shared by Compass Point analyst Ed Engel, who cautioned investors against assigning too much value to the project before meaningful use emerges.
“We would prefer to wait until Arc generates significant transaction activity before assigning value to ARC tokens,” Engel wrote in a research note Monday. He added that cryptocurrency venture capital firms have long backed blockchain projects at high valuations, but then token prices decline after launch.
The economics behind Arc remain another open question.
Circle said fees on the network can be denominated in stablecoins while still accumulating value for the ARC token through validator rewards and token burns. Analysts say the structure resembles Ethereum’s model, in which network activity drives demand for the underlying token.
Lau said the $3 billion valuation attached to the pre-sale appears credible given the caliber of institutional investors involved. “I don’t think it’s crazy,” he said. For now, Arc matters less for what it generates today than for what it signals about Circle’s future ambitions.
“Significant competition”
The disagreement over whether to buy: the token or the stock, highlights a central debate currently emerging around Circle and the stablecoin industry: whether owning blockchain infrastructure becomes more important as the issuance of digital dollars itself becomes more competitive.
On the one hand, with the launch of Arc, incumbent networks would face increased competition, according to digital assets investment bank FRNT. “Incumbent networks will face significant competition as solutions such as Arc mature,” the company wrote in a note.
On the other hand, the sector is dominated primarily by Tether’s USDT and Circle’s USDC, and other stablecoins such as PayPal are not gaining market share, according to Clear Street’s Lau. But now the addition of Arc to Circle creates new competitive tensions, 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 potentially also with Coinbase’s Base blockchain.
While questions remain about valuation and long-term competitive impact, Arc’s launch fits a pattern in which crypto developments are increasingly focused on large financial institutions and Wall Street, rather than individual users.
Tempo, incubated by payments giant Stripe and investment firm Paradigm, raised $500 million at a $5 billion valuation in October to launch a payments-focused blockchain. Digital Asset, developer of the Canton Network, has attracted backing from Goldman Sachs, DRW, Citadel Securities, BNY and Nasdaq, and is reportedly raising an additional $300 million at a valuation of $2 billion.
Arc’s fundraising is another example of big investors betting that big financial companies increasingly want blockchain infrastructure designed around how institutions actually move money — cross-border payments, cash management, currencies and tokenized assets — rather than the open, retail-focused systems that crypto started with. And Circle is betting on the trend by going all-in on Arc.
