Circle’s (CRCL) upcoming Arc blockchain and its $222 million token pre-sale are raising a broader question for cryptocurrency investors: should Circle continue to be valued primarily as a stablecoin issuer or as an infrastructure company building the rails for digital finance?
In addition to its quarterly earnings this week, the company announced a major fundraising round for Arc ahead of a planned summer launch, valuing the network at approximately $3 billion backed by investors including a16z crypto, Apollo, BlackRock and ARK Invest.
While earnings results were mixed, the news resonated well with investors, as Circle shares rose more than 15% on Monday, suggesting the launch addresses a critical compliance gap for Wall Street.
“We have built what we believe will be one of the most institutionally prepared networks in the world,” Allaire explained during the earnings call, describing Arc as a system designed to be operated by financial institutions with the “trust necessary for global economic infrastructure.”
While this move was applauded by the market and some analysts, including Clear Street’s Owen Lau, who called Arc a “second growth engine” for the USDC issuer, there are still questions about the valuation of Circle shares against the Arc token, as well as the 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. That prospect has led some investors to question whether stablecoins themselves may become commodities over time.
What is Arc?
The Arc chain, in test mode since October with plans to go live this summer, is Circle’s attempt to expand its stablecoin business to a broader infrastructure layer.
During the company’s earnings call on Monday, CEO Jeremy Allaire pitched Arc as an “economic operating system” designed for payments companies, asset issuers and capital markets.
“We built the roads for USDC,” Allaire said on the earnings conference call. “We are now opening them up to other stablecoin issuers and real-world assets.”
The idea, he said, is to make stablecoins and tokenized assets easier to move, while maintaining the level of control, compliance and reliability that large financial players expect. 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 where the stablecoin industry is headed. The industry’s market capitalization is at an all-time high, surpassing $320 billion. Almost every crypto or traditional company is building a stablecoin or rails to service the industry, promoting a more efficient and less expensive alternative to legacy systems. A16z, lead investor in Arc’s fundraising, perhaps put it aptly 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 close that gap, offering fast settlement, configurable privacy and known validators, features that more closely align with institutional requirements, the firm said.
“As the world’s finances move on-chain, we believe 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.
Circular Stocks vs. Arc Token
However, given the pre-sale of the Arc token, questions remain about how Arc affects Circle’s valuation in the long term: Why should one buy the shares if they can now buy the token?
For Clear Street’s Lau, they are “two very different concepts.”
He described Arc as the infrastructure layer, while USDC operates as an application running on top of it. “You have one more tunnel to run your applications. 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 on Monday, he argued that the network could bolster USDC adoption, particularly as Circle moves toward AI-powered 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 said. “We still don’t know what applications will actually run on Arc.” For now, he sees 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 warned investors not to assign too much value to the project before significant use emerges.
“We would prefer to wait for Arc to generate significant transaction activity before attributing value to ARC tokens,” Engel wrote in a research note on Monday. He added that crypto venture firms have a long history of backing blockchain projects with high valuations, only to have token prices subsequently decline after launch.
The economics behind Arc remains another open question.
Circle has said that fees on the network can be denominated in stablecoins while also accumulating value for the ARC token through validator rewards and token burning. Analysts say the structure resembles the Ethereum 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 may matter less for what it generates today than for what it signals about Circle’s future ambitions.
‘Significant competition’
The disagreement over what to buy: the token or the stock highlights a central debate now 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, traditional networks would face greater competition, according to digital asset investment bank FRNT. “Traditional networks will face significant competition as solutions like Arc increase their maturity,” the firm wrote in a note.
On the other hand, the industry is primarily dominated by Tether’s USDT and Circle’s USDC, and other stablecoins like PayPal are not gaining market share, according to Clear Street’s Lau. But now, Circle’s addition to Arc 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 those networks and potentially Coinbase’s Base blockchain as well.
While there are questions about the valuation and long-term competitive impact, Arc’s launch fits a pattern in which crypto developments have increasingly focused on large financial institutions and Wall Street, rather than retail 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. Canton Network developer Digital Asset has attracted backing from Goldman Sachs, DRW, Citadel Securities, BNY and Nasdaq and is reportedly raising another $300 million at a $2 billion valuation.
Arc’s fundraising is another example of big investors betting that big financial firms increasingly want blockchain infrastructure designed around how institutions actually move money (cross-border payments, treasury management, currencies and tokenized assets) rather than the open, retail systems that cryptocurrencies began with. And Circle is betting on the trend by betting on Arc.
