Circle, the first publicly traded stablecoin company, unveiled its latest strategy in its Q2 2025 financial report by announcing Arc—a new public blockchain and the first Layer-1 chain dedicated exclusively to stablecoins. Positioned to compete directly with Tether’s Plasma and Stable, Arc is scheduled to launch its public testnet in fall 2025. Explore what makes Circle’s new Arc initiative unique and examine its core technical highlights.

Arc is an EVM-compatible Layer-1 blockchain purpose-built for stablecoin finance and asset tokenization, serving as a foundational settlement layer for programmable money on the web. It’s specifically designed for use cases like global payments, foreign exchange (FX), and capital markets. Arc aims to tackle common obstacles enterprises and institutions face with existing public chains—such as transaction fee volatility, settlement uncertainty, and insufficient privacy. Notably, Arc is closely tied to payment infrastructure but does not target the consumer market.

Key Technical Features of Arc

USDC as Native Gas and Stable Fee Mechanism

Arc uses USDC as the native token for paying transaction (gas) fees and features a fee market mechanism inspired by Ethereum’s EIP-1559. However, Arc leverages an exponentially weighted moving average of block utilization to adjust its base fee, smoothing out short-term fluctuations and ensuring consistently low transaction costs.

Beyond USDC, Arc is also developing a dedicated Paymaster payment channel, allowing users to pay gas fees with other stablecoins and tokenized fiat currencies.

High Performance

Arc is powered by its high-performance consensus engine, Malachite, based on the Tendermint BFT protocol. This architecture delivers deterministic settlement finality, allowing transactions to be confirmed and made irreversible in under a second.

The network is secured by a select group of permissioned, geographically distributed, and reputable institutional validators. These validator identities are public and must adhere to high standards for accountability and operational resilience—following a model similar to the former Libra project.

In test scenarios with 20 geographically distributed validator nodes, Arc achieves approximately 3,000 transactions per second (TPS), with finality in less than 350 milliseconds. With just four validator nodes, throughput can exceed 10,000 TPS and finality time falls below 100 milliseconds.

Optional Privacy Features

Arc’s privacy roadmap begins with confidential transfers, which encrypt transaction amounts—making them invisible to the public while keeping both parties’ addresses viewable. This feature is designed for business clients seeking to protect sensitive commercial information.

To meet regulatory requirements, Arc’s privacy architecture also supports selective disclosure through tools like view keys—similar to Monero. While most transactions remain private, third parties (such as auditors or regulators) can be granted access to specific transaction data when necessary. Institutions have visibility into their clients’ transactions to comply with monitoring and Travel Rule requirements.

Privacy is implemented via a modular backend, initially leveraging trusted execution environments (TEEs) to handle encrypted data. Future enhancements will include advanced privacy technologies such as multi-party computation (MPC), fully homomorphic encryption (FHE), and zero-knowledge proofs.

MEV Mitigation Roadmap

Arc recognizes that not all MEV is detrimental, distinguishing between constructive MEV (like arbitrage that aids stablecoin price discovery) and harmful MEV (such as sandwich attacks).

To curb harmful MEV while preserving beneficial arbitrage, Arc’s roadmap includes implementing encrypted mempools, batched transaction processing, and multi-proposer protocols.

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