Author: Zhou, ChainCatcher
On May 11, while releasing its Q1 2026 earnings report, Circle announced that the native token ARC of its public chain Arc had completed a $222 million presale, with the network’s fully diluted valuation reaching $3 billion.
The round was led by a16z crypto with a $75 million investment, followed by top-tier institutions including BlackRock, Apollo, Intercontinental Exchange (ICE), SBI Group, SC Ventures, and ARK Invest.
CRCL's stock price surged nearly 16% on the same day, with its market capitalization rebounding to above $300 billion.
Image Source: RootData
This development has prompted a core question in the market: Circle is already a public company; if one is optimistic about its future, simply holding CRCL stock seems sufficient. Why then issue an ARC token? Both appear to capture the value of the Arc network. What is the unique value of each?
1. Why is Circle Building Arc?
Why doesn't Circle continue issuing and using USDC on Ethereum or Solana, but instead invests significant resources to build its own public chain?
a16z Crypto explains that as global finance gradually moves on-chain, only a few public chains will be capable of serving as the 'foundational layer for the on-chain economic system.'
Stablecoin transaction volume approached $9 trillion last year, on par with global payment networks like Visa and PayPal.Cross-border payments, B2B settlement, and forex trading are becoming core use cases, solidifying stablecoins' role as a fundamental layer of global financial infrastructure.
However, existing blockchain infrastructure still primarily caters to crypto-native users and individual developers, lacking native support for large-scale institutional needs.
Industry insiders point out that institutions face several core pain points when conducting business on-chain. These include the need for closed-loop on-chain/off-chain verification for asset issuance and redemption, deterministic finality for payments, compliance capabilities integrated at the base layer, configurable privacy protection, and predictable Gas costs denominated in USDC.
These requirements are difficult for existing public chains like Ethereum and Solana to satisfy natively.
For Circle, the company has historically relied on interest from USDC reserves for profitability. In Q1, USDC circulation reached $77 billion, a 28% year-on-year increase.As the business scale continues to expand, relying solely on existing public chains no longer fully meets the deeper needs of institutional clients.
Therefore, Circle launched Arc, with one of its core objectives being to fill this gap. The fact that stablecoins circulate on others' chains does not mean that stablecoin finance belongs to those chains—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, ARC Solves the Coordination Problem
Since USDC already serves as Arc's Gas token, why issue an ARC token?
USDC already addresses the stability issue at the transaction level. Institutions can use dollars for direct fee payments, with predictable, accountant-friendly costs, avoiding the accounting complexities caused by crypto asset price volatility.
But for a network's long-term healthy operation, solving just the transaction problem is not enough; coordination problems also need to be addressed.
According to the official whitepaper, Arc will gradually transition from its current PoA to PoS. Validator nodes need to stake assets to secure the network. The core of staking is to align node behavior with economic incentives; malicious actions face slashing risks. USDC is pegged to $1 and cannot truly bind nodes to the network's success or failure; only the native token ARC can provide this dynamic economic incentive.
Governance also requires interest alignment. Key decisions like fee rates, inflation parameters, and burn ratios require participants to take a long-term perspective. Voting with only USDC could lead to transient participation without sustained motivation. ARC holders' asset values are directly linked to the network's performance, giving them more incentive to make choices beneficial for the network's long-term development.
The whitepaper also clarifies that ARC's governance rights have staged boundaries. Economic parameters are decided by token holder votes, but important matters like protocol upgrades, security incident handling, and validator qualification review remain under Circle's control initially, with gradual decentralization as the governance mechanism matures.
In simple terms, USDC is the lifeblood of the Arc network, responsible for efficient daily flow; ARC is the network's equity, responsible for aligning the long-term interests of all parties. This dual-token design also transforms part of the ecosystem development cost from a fixed cash expenditure for Circle into incentive arrangements tied to the network's success.
3. CRCL and ARC: Which Piece of the Pie Do They Each Capture?
Thus, Circle simultaneously possesses the public company equity CRCL and the network native token ARC, both capturing value from the same Arc network. So, which piece of the pie does each specifically capture?
According to the whitepaper, the total supply of ARC tokens is 10 billion, with an explicit allocation: 60% for the ecosystem, including developer incentives, network growth programs, and user participation rewards; 25% allocated to Circle the company, for operating validator nodes, staking, and governance; 15% as a long-term reserve for network stability and strategic flexibility.
Regarding the fee mechanism, all protocol fees on Arc, regardless of the asset used for payment, are fully converted into ARC at the protocol layer. One portion is permanently burned, another portion is distributed to stakers and validators. The more active the network, the stronger ARC's value capture.
CRCL shareholders primarily benefit through the company level. The company continues to enjoy interest income from USDC reserves as a core revenue stream, along with gains from other business growth like the payment network CPN. Simultaneously, Circle's 25% share of ARC also allows it to indirectly benefit from network-level rewards.
Crypto analyst BTCdayu proposes a three-dimensional valuation framework for understanding CRCL: The first dimension is reserve interest income, the most stable current cash flow, forming the valuation floor. The second dimension is payment network revenue; as CPN scales, this part could approach a Visa-like network fee model. The third dimension is the network option value brought by Arc, representing the market's expectation for Circle's transformation from a stablecoin issuer to a financial infrastructure platform.
Simply put, CRCL captures the company's overall stable cash flow and existing business growth, while ARC captures the network-level growth elasticity, including Gas fee conversion, ecosystem expansion, and long-term network effects.
The two form a clear dual-track structure. The more successful the Arc network, the greater USDC usage and business synergies, benefiting Circle at the company level. At the same time, ARC token value rises, appreciating Circle's 25% share, which ultimately benefits CRCL shareholders.
However, the two are legally completely independent.Officially, it is stated that ARC does not represent equity in Circle and confers no claims to Circle's revenue, profit, assets, or CRCL shares. This means ARC holders lack the fiduciary duty protections of public company shareholders; their returns depend entirely on actual network adoption and tokenomics design.
4. How Can Ordinary Users Participate?
After understanding the value distribution between CRCL and ARC, a practical question arises: Who exactly will buy the ARC tokens? And how can ordinary users participate at low cost?
The first type of buyer is institutional strategic investors. They entered through the $222 million presale at a price of $0.3 per token, with lock-up periods ranging from 1 to 4 years. These institutions not only provide capital but are mostly potential users and builders of Arc. For example, BlackRock is already testing tokenized asset settlement on the testnet; ICE, as the parent company of the NYSE, and SBI Group, as Japan's largest financial group, are laying the groundwork for future operations on Arc.
The second type is ecosystem builders and long-term holders. Developers and liquidity providers earn ARC incentives through contributions; the 60% ecosystem allocation is designed for this purpose. They focus more on the network's long-term growth, similar to early employees holding company equity.
The third type is retail speculators and participants. They focus on early narrative opportunities and ecosystem incentives, anticipating price volatility post-mainnet launch.
For ordinary users without presale access, Arc offers several low-cost participation paths.
The Arc Testnet launched in October 2025 and has processed over 244 million test transactions to date. The mainnet is expected to launch in the summer of 2026. Users can claim test tokens for free to perform operations like swaps, bridging, and contract deployment to familiarize themselves with the network.
Arc House community is the main entry point for ordinary users. Users can accumulate points by registering for the community, staying active, posting, reading content, and participating in Q&A. Having an answer accepted yields extra points.
Advanced participation methods include content contribution, video sharing, event organization, and even hosting offline Meetups. Furthermore, users with teams or products can apply for Circle Developer Grants.
It should be noted that Arc House points are merely recognition of community contributions; they do not have monetary value, nor do they guarantee any specific rights or allocation. Specific rules are subject to the latest official announcements.
Conclusion
Currently, the institutional on-chain sector is fiercely competitive, and Arc is not the sole player.
Digital Asset, owner of the Canton Network, is completing a new funding round led by a16z crypto at a valuation of approximately $2 billion. Plasma positions itself as a stablecoin-native settlement layer with a relatively more attractive valuation. Visa included Arc, Canton, Plasma, Base, and Tempo as stablecoin settlement test points in April. This indicates the sector is still in a phase of parallel competition among multiple players.
Against this backdrop, Arc's $3 billion presale FDV is at a relatively high level. Retail investors participating in the secondary market need to fully assess the project's narrative potential and the competitive landscape within the sector.
From a long-term perspective, holding ARC tokens, which have a 2-3% annual inflation rate, requires the network to generate sufficient real transaction fees to offset issuance pressure for value appreciation. CRCL, on the other hand, is supported by relatively clear cash flows from USDC reserve interest and payment network revenue. The two face different risk-return structures.
In the short term, market sentiment often follows its own logic. Around the mainnet launch, concentrated narrative hype could present periodic opportunities. At that time, the appreciation of Circle's 25% ARC holdings would also benefit CRCL shareholders.
Regulatory-wise, the enactment of the GENIUS Act has strengthened Circle's moat. The updated draft of the CLARITY Act is now public and advancing in Congress, expected to provide clearer regulatory certainty for the digital asset ecosystem, which is a significant positive for Circle.
Overall, Arc is one of Circle's crucial strategic moves currently. As noted in the whitepaper, "A global economic operating system cannot be coordinated by a single entity; it will transform participants using Arc into those sustaining Arc." Whether this vision ultimately materializes depends on whether, post-mainnet launch, it can attract a sufficient scale of real institutional transactions and economic activity.
Until all data materializes, all narratives remain just narratives.
