Circle Unveils Arc, a New Layer 1 Blockchain, Raising Questions on Control and Governance
Circle, the company behind the USDC stablecoin, has revealed plans for a new enterprise-focused Layer 1 blockchain named Arc. While the project promises high performance and institutional-grade features, some in the crypto community are voicing concerns over its governance model and level of decentralization.
In an August 12 announcement, Circle described Arc as:
“Arc aims to establish itself as foundational infrastructure for regulated money movement, supporting a globally distributed financial system.”
According to Circle, Arc will integrate directly with its existing ecosystem and maintain compatibility with numerous partner blockchains. The public testnet is expected to go live sometime between September and December 2025.
Designed for Speed and Institutional Use
Arc is being positioned as a high-speed platform tailored for stablecoin payments, foreign exchange, and capital markets applications. It will be Ethereum Virtual Machine-compatible, use USDC as its primary gas token, and introduce a built-in FX engine for stablecoins. Circle says the network will achieve sub-second finality, offer optional privacy features, and target up to 3,000 transactions per second using 20 validators, potentially scaling to 10,000 TPS with fewer validators.
Planned features include confidential transfers with “view key” access, MEV mitigation through encrypted mempools and batch processing, and support for Circle’s interest-bearing USYC stablecoin. Arc will also enable fast bridging via Circle’s CCTP and Gateway, and incorporate AI-driven treasury tools for institutions. Beyond stablecoins, the blockchain will be capable of hosting regulated tokenized assets, from equities and bonds to private credit and investment funds.
To ensure compliance, Circle intends to collaborate with licensed custodians, asset issuers, and fund administrators, ensuring all tokenized assets are backed and legally recognized.
Criticism Over Centralization
Not everyone is convinced Arc is the right move. Some critics say launching another Layer 1 isn’t necessary, especially for a stablecoin issuer. Columbia Business School adjunct professor Omid Malekan questioned whether the network could succeed without a wide variety of assets and an active DeFi environment.
Adam Cochran, a partner at venture firm Cinneamhain Ventures, disputed calling Arc a traditional Layer 1 at all, describing it instead as a consortium chain with a limited set of pre-approved validators. These validators, he noted, have the ability to reverse transactions under certain “dispute protocols.”
Cochran also argued that using USDC as the base token removes typical validator incentives, making a decentralized setup impractical and requiring a closed governance model.
He summed up his stance with:
“Blockchains exist because exploitative middlemen, like banks and transfer agents, take undue fees and apply undue censorship. This industry was built to fix that in peer-to-peer systems, not by just building new banks.”
Disclaimer: This content does not constitute trading or investment recommendations. It’s essential to conduct your own research before purchasing any cryptocurrency or investing in any services.
