Circle’s ( CRCL ) upcoming Arc blockchain 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 for digital finance?
Alongside its quarterly earnings 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.
While earnings results were mixed, the news resonated with investors, as Circle shares jumped more than 15% on Monday, suggesting the launch addresses a critical compliance gap for Wall Street.
“We’ve built what we believe will be one of the most institutionally ready 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 required for global financial infrastructure.”
While this move was cheered 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 increasing competition.
The move also comes as Congress advances stablecoin legislation that could eventually allow banks, fintechs and payments firms to issue their own digital dollars. This prospect has led some investors to question whether stablecoins themselves can become commoditized 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 into a broader infrastructure layer.
During the company’s Monday earnings call, CEO Jeremy Allaire pitched Arc as a “financial operating system” designed for payments firms, asset issuers and capital markets.
“We built the highways for USDC,” Allaire said on the earnings call. “Now we’re opening them up to other stablecoin issuers and real-world asset issuers.”
The idea, he said, is to make stablecoins and tokenized assets easier to move, while maintaining the level of control, compliance and reliability that major financial players expect. The chain is also being built to be ready for AI agents to gain ground in finance, he added.
Allaire’s comments are indicative of where the stablecoin industry is headed. The industry’s market capitalization is at an all-time high, rising above $320 billion. Almost every crypto or traditional firm is building either a stablecoin or shard to service the industry, highlighting a more efficient and cheaper alternative to legacy systems. A16z, lead investor in Arc’s fundraising, put it perhaps aptly when it said that stablecoins are becoming “one of the most important tools for global financing.”
However, the VC firm noted that the underlying blockchain infrastructure remains fragmented and largely optimized for crypto-native users rather than banks and businesses. According to a16z, that’s where Arc comes in, aiming to bridge that gap by offering fast settlement, configurable privacy and known validators, features that more closely match institutional requirements, the firm said.
“As the world’s finances move on-chain, we believe that a handful of blockchain networks will emerge together as the new backbone of the financial system,” a16z partners Ali Yahya and Noah Levine wrote. “Arc is in a strong position to become one of them,” they added.
Circle shares vs Arc token
But given Arc’s token presale, questions remain about how Arc affects Circle’s long-term valuation: Why 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 acts as an application that runs on top. “You have one more tunnel for your apps to run on. It just means you have more channel, more opportunities to expand your USDC down the road,” 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 on Monday, he argued that the network could boost USDC adoption, especially as Circle pushes into AI-powered payments, tokenized financing and commercial settlement systems.
Still, Lau acknowledged that the Arc remains highly speculative, at least for now.
“It depends on the network activity,” he said. “We still don’t know what apps are actually running on the Arc.” For now, he sees Arc as “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 prefer to wait for Arc to generate meaningful 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 at inflated valuations, only for token prices to later drop after launch.
The economics behind Arc is still an open question.
Circle has said that fees on the network can be denominated in stablecoins while still attributing value to the ARC token through validator rewards and token burns. Analysts say the structure is similar to Ethereum’s model, where network activity drives demand for the underlying token.
Lau said the $3 billion valuation attached to the pre-sale seems credible given the caliber of institutional investors involved. “I don’t think it’s crazy,” he said. For now, Arc may mean less for what it generates today than what it signals about Circle’s future ambitions.
“Significant Competition”
The disagreement over what to buy: the token or the stock highlights a key debate now emerging around Circle and the stablecoin industry: whether owning blockchain infrastructure will become more important as digital dollar issuance itself becomes more competitive.
On the one hand, with the launch of Arc, established networks will face increased competition, according to digital investment bank FRNT. “The established networks will face significant competition as solutions such as Arc increase in maturity,” the firm wrote in a note.
On the other hand, the industry is mostly 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 adding Arc is creating 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 with Coinbase’s Base blockchain as well.
While there are questions about valuation and the long-term competitive impact, the launch of Arc fits a pattern where crypto development has increasingly shifted focus to 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. 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 $2 billion valuation.
Arc’s fundraising is another example of big money investors betting that big financial firms increasingly want blockchain infrastructure designed around how institutions actually move money — cross-border payments, treasury management, currency and tokenized assets — rather than the open, retail-first system crypto started with. And Circle is betting on the trend by going all-in on Arc.
