Circle’s second growth curve: After raising $220 million, is CRCL still ARC?

Author: Zhou, ChainCatcher

On May 11, Circle, while releasing its Q1 2026 financial report, announced that its native token ARC for its Layer 1 public chain Arc had completed a $222 million presale, with a fully diluted network valuation of $3 billion.

Among them, a16z crypto led the round with $75 million, and top-tier institutions including BlackRock, Apollo, ICE (the parent of the NYSE), SBI Group, Standard Chartered Ventures, and ARK Invest also participated.

CRCL’s stock price surged nearly 16% on the same day, and its market capitalization rebounded to over $30 billion.

Image source: RootData

The market then raised a core question: Circle is already a publicly listed company—if investors are bullish on its future, they could simply hold CRCL shares. Why issue the ARC token instead? Both are capturing the value of the Arc network, but what does each one represent?

1. Why Circle builds Arc in-house

Why doesn’t Circle continue to issue and use USDC on Ethereum or Solana, but instead spend enormous resources to build its own public chain?

a16z Crypto explained that as global finance gradually moves on-chain, in the future only a small number of public chains will be able to serve as the “base layer for on-chain economic systems.”

Last year, stablecoin trading volume was close to $9 trillion, putting it on the same order of magnitude as global payment networks such as Visa and PayPal. Cross-border payments, B2B settlement, and foreign exchange trading are becoming core use cases for stablecoins, and stablecoins have upgraded to the core layer of global financial infrastructure.

However, existing blockchain infrastructure is still mainly designed for crypto-native users and individual developers, lacking native support for large-scale institutional needs.

Industry insiders point out that when institutions carry out business on-chain, they face several core pain points, including the need for a fully closed-loop of on-chain and off-chain identity/accounting for asset issuance and redemption, deterministic finality for payments, compliance capabilities that must be built at the underlying layer in advance, configurable privacy protection, and predictable Gas costs using USDC.

These needs are difficult for existing public chains such as Ethereum and Solana to meet natively.

For Circle, in the past, the company mainly relied on interest income from USDC reserves to generate profits, with USDC circulating supply reaching $77 billion in the first quarter, up 28% year over year. As the business continues to expand, relying solely on existing public chains can no longer fully match the deep needs of institutional clients.

Therefore, Circle launched Arc, one of whose core purposes is to fill this gap. Stablecoins circulating on someone else’s chain does not mean that stablecoin finance belongs to you—this is the underlying logic behind Circle’s decision to build its own L1.

Image source: X user @vanisaxxm

2. USDC solves the transaction problem, while ARC solves the coordination problem

Since USDC is already the Gas token for Arc, why issue an ARC token as well?

USDC has already done a very good job of addressing stability issues at the transaction layer. Institutions can pay transaction fees denominated directly in dollars, with predictable costs and bookable accounting, avoiding the troubles that crypto asset price volatility brings to finance teams.

But for the network to run healthily over the long term, it’s not enough to solve only the transaction problem; coordination issues must also be addressed.

According to the official white paper, Arc will gradually transition from PoA to PoS. Validator nodes need to stake assets to ensure network security; the core of staking is binding node behavior through economic incentives—once a validator misbehaves, it will face penalties and slashing. Since USDC’s value is fixed at $1, it cannot truly bind nodes to the success or failure of the network; only the native token ARC can provide this kind of dynamic economic incentive.

Governance also requires aligning incentives. Key decisions such as fee rates, inflation parameters, and the burn ratio need participants to consider them from a long-term perspective. If you vote only with USDC, holders may lack sustained motivation—they can vote and then exit after casting their votes. ARC holders’ asset value is directly tied to network performance, giving them stronger motivation to make choices that benefit the network’s long-term development.

The white paper also states clearly that ARC governance rights have phase-based boundaries. Economic parameters are determined by token holder voting, but important matters such as protocol upgrades, security incident handling, and validator qualification review are still retained by Circle in the initial stage, and will be gradually delegated as the governance mechanism matures later on.

In simple terms, USDC is the lifeblood of the Arc network, responsible for daily efficient flows; ARC is the network’s equity, responsible for binding the interests of various parties together over the long term. This dual-token design also shifts some of the ecosystem-building costs from Circle’s fixed cash expenditures to incentive arrangements tied to the network’s success or failure.

3. CRCL and ARC—what part of the cake does each eat?

With this, Circle simultaneously holds publicly listed company equity, CRCL, and the network’s native token ARC—both capturing the value of the same Arc network. So, what exactly is each of them “eating”?

According to the white paper, Arc’s total supply is 10 billion ARC tokens, with a clearly defined allocation: 60% is used for the ecosystem, including developer incentives, network growth plans, and user participation rewards; 25% is attributed to Circle, used for operating validator nodes, staking, and governance; 15% is set aside as a long-term reserve, used for network stability and strategic flexibility.

Regarding the fee mechanism, all protocol fees on Arc—regardless of which asset users pay with—will be fully converted into ARC at the protocol layer. A portion is permanently burned, and a portion is allocated to stakers and validators. The more active the network is, the stronger the value capture for ARC.

CRCL shareholders mainly profit through earnings at the Circle company level. The company continues to benefit from USDC reserve interest as a core income source, as well as revenue generated by other business growth such as the payment network CPN. At the same time, since Circle holds 25% of the ARC, it can also indirectly share rewards at the network level.

Crypto analyst BTCdayu proposed a three-dimensional valuation framework to understand CRCL: the first dimension is reserve interest income. This is currently the most stable cash flow and forms the valuation floor. The second dimension is payment network revenue; as the scale of CPN grows, this portion could approach a Visa-like network fee model. The third dimension is the network option value brought by Arc—this reflects the market’s expectations that Circle will transform from a stablecoin issuer into a financial infrastructure platform.

In simple terms, CRCL captures the company’s overall stable cash flows and growth from existing business, while ARC captures growth elasticity at the network layer, including conversion of Gas fees, ecosystem expansion, and long-term network effects.

The two create a clear dual-track structure. The more successful the Arc network becomes, the greater the USDC usage and the stronger the business synergy—benefiting Circle at the company level. Meanwhile, the value of ARC rises, and Circle’s 25% stake also increases in value, which ultimately flows through to CRCL shareholders.

However, legally, the two are completely independent. The official statement notes that ARC does not represent Circle’s equity and does not grant ARC holders any claim rights to Circle’s income, profits, assets, or CRCL shares. This means ARC holders do not have protections comparable to publicly listed company shareholders’ fiduciary responsibilities; their returns depend entirely on actual network adoption and the tokenomics design.

4. How do ordinary users participate in “making gains with low cost”?

After figuring out how the value of CRCL and ARC is allocated, a practical question is: who exactly sells the ARC token to? And how should ordinary users participate at low cost?

The first category of buyers is institutional strategic investors. They entered via the $222 million presale at a unit price of $0.3, with lock-up periods ranging from 1 to 4 years. These institutions not only provide funding, but most of them are also potential Arc users and builders. For example, BlackRock has already tested tokenized asset settlement on the testnet, and ICE (the parent company of the NYSE) and SBI Group (one of Japan’s largest financial groups) are also laying groundwork in advance for future business on Arc.

The second category is ecosystem builders and long-term holders. Developers and liquidity providers earn ARC incentives through their contributions; the 60% ecosystem allocation is prepared for this purpose. They care more about long-term network growth, similar to early employees holding company equity.

The third category is retail speculators and participants. They focus on early narrative opportunities and ecosystem incentives, expecting price flexibility after the mainnet goes live.

For ordinary users who do not have access to the presale, Arc offers multiple low-cost participation paths.

Arc Testnet was launched in October 2025. As of now, it has processed more than 244 million test transactions, and the mainnet is expected to go live in the summer of 2026. Users can claim test tokens for free to perform activities such as Swap, Bridge, and contract deployment, familiarizing themselves with network interactions.

The Arc House community is the primary entry point for ordinary users. Users can build points by registering the community, staying active, posting, reading content, participating in Q&A, and more. If a user’s answer is accepted, they will also receive additional points.

Advanced participation options include content contributions, video sharing, and organizing events—up to and including hosting offline Meetup sessions. In addition, users with teams or products can also apply for Circle Developer Grants.

It should be noted that Arc House points only recognize community contributions; they do not have any monetary value and do not guarantee any specific allocation of rights or benefits. The specific rules are subject to the latest official announcements.

Conclusion

Competition in the on-chain institutional track is fierce, and Arc is far from the only standout.

Digital Asset belonging to Canton Network is completing a new funding round at a valuation of around $2 billion, led by a16z crypto; Plasma is positioned for stablecoin-native settlement, with a relatively more attractive valuation. In April, Visa included projects such as Arc, Canton, Plasma, Base, and Tempo simultaneously in stablecoin settlement testing. This indicates that the sector is still in a stage where multiple players operate in parallel and develop through competition.

Against this backdrop, Arc’s $3 billion presale FDV is positioned relatively high. If retail investors participate in the secondary market, they need to fully evaluate the project’s narrative potential and the competitive landscape within the sector.

Over the long term, holding ARC with annual inflation of 2% to 3% requires the network to generate enough real transaction fees to offset issuance pressure, so that value growth can be achieved. Meanwhile, CRCL relies on USDC reserve interest and payment network revenue, supported by comparatively clearer cash flows. The two face different risk-reward structures.

In the short term, market sentiment often follows its own logic. Around the time before and after mainnet launch, the narrative’s concentration and surge period may bring phase-based opportunities. At that time, the 25% ARC held by Circle will also appreciate, and CRCL shareholders can benefit as well.

On the regulatory front, the implementation of the GENIUS Act strengthens Circle’s moat, while the new version of the CLARITY Act has already been released publicly and is currently being advanced in Congress. It is expected to provide clearer regulatory certainty for the digital asset ecosystem, which is an important positive for Circle.

Overall, Arc is one of Circle’s important strategic initiatives. The white paper states, “A global economic operating system cannot be coordinated by a single entity; it will use Arc’s participants to turn them into those who maintain Arc.” Whether this vision can ultimately be realized still depends on whether the mainnet can attract enough scale of real institutional trading and economic activity.

Before all data truly lands in practice, all narratives remain just narratives.

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