Circle designs blockchain for ‘stablecoin-nativeʼ products and services

Stablecoin provider Circle is launching a blockchain designed specifically for stablecoin-based transactions rather than cryptocurrency. Arc, the firmʼs new level-one blockchain, is targeted at institutional users that want to use digital assets with the “privacy inherent” in traditional finance (TradFi) networks without cryptoʼs volatility, says Circle.

The project is intended to create an infrastructure upon which other crypto asset businesses can build products and services.

The announcement came after the US legislation providing for stablecoin regulation, the GENIUS Act, became law in July. Circle also recently applied for federal trust charter approval to come under federal oversight by the Office of the Comptroller of the Currency (OCC).

While the GENIUS Act targeted stablecoins such as Circleʼs USDC, the blockchain system is primarily defined and addressed through the CLARITY Act, which is currently before the US Senate.

According to Circle chief product and technology officer Nikhil Chandhok, Arc will facilitate a new class of “stablecoin-native applications”, such as offering blockchain-based loans, trading foreign stablecoin currencies and settling capital markets transactions.

In an interview with New York Stock Exchange (NYSE) TV, Chandhok explained: “Stablecoin finance means instant finality; it means native foreign exchange (FX) markets. We love USDC but the whole world runs on different kinds of currencies, and [the world] needs FX to settle trade across the border.”

However, the Bank for International Settlements (BIS) recently questioned the use of “foreign currency-denominated stablecoins” in its July Bulletin, specifically addressing concerns over their impact on “monetary sovereignty”.  

“Broad-based stablecoin adoption could provide seamless access to dollar-denominated claims for non-US residents, potentially weakening the effectiveness of domestic monetary policy,” it said. “During 2024, these stablecoin issuers’ net purchases of Treasury securities were reportedly comparable with those of investors in large countries and other jurisdictions and GMMFs government money market funds.”

Arc compliance

In Circleʼs earnings call, CEO Jeremy Allaire said the firm is “very focused on vetted professional validators that can meet the operational security and compliance expectations for people running this critical [blockchain] infrastructure”.

Arc claimed to use a permissioned proof-of-stake (PoS) model — a blockchain consensus mechanism where only authorised “validators”, rather than the general public, are allowed to participate in transactions. The blockchain will also include opt-in privacy features, allowing users to conduct transactions without sharing the amounts transacted, according to Allaire.

Compliance Corylated contacted the BIS regarding Arcʼs compliance with the Basel framework. The Basel Committee said that crypto asset exposures should follow SCO 60.16 to 60.22. In particular, SCO60.17 states that all key elements of the crypto (and stablecoin) networks must be “well-defined such that all transactions and participants are traceable”.

Circle had not responded to a request for details about Arc’s Know Your Customer (KYC) processes at the time of going to press.

Strategic partners

Beyond the blockchain, Circle is working with several strategic partners to create a hub on Arc for its stablecoin USDC, including cross-border payments platforms Corpay, FIS and Fiserv, as well as crypto exchanges Binance and OKX. For example, through its subsidiary Circle Internet Group, Circle is working with US-based Corpay to embed its USDC into the payment firm’s cross-border payments rail.

It is still unclear how the crypto exchange partnerships would “accelerate global adoption” of Circle’s USDC; however, Binance claimed in a statement that “Circle’s solid liquidity and regulatory edge suggest a robust future in the stablecoin sector”.

In June 2021, the Financial Conduct Authority (FCA) ordered Binance to stop all regulated activity in the UK, citing concerns over potential money laundering and a lack of consumer protection. As of August 2025, no other entity in the Binance Group holds any form of UK authorisation or registration to conduct regulated business in the UK.

Meanwhile, in February, Seychelles-based OKX pleaded guilty to violation of US anti-money laundering (AML) laws since at least 2017, and agreed to paid penalties totalling more than $504 million, according to a statement by the US Attorneyʼs Office.

Regulatory scepticism

In 2022, Circle submitted written evidence to the UK Treasury Committee regarding a parliamentary inquiry into the crypto industry. It called on the UK government to distinguish different digital assets based on their “economic behaviour” rather than combining “disparate innovations into one basket”.

“Modern financial institutions, including regulated virtual asset service providers, have spent considerable time and resources to develop sophisticated AML programs, applying advanced technology to ensure compliance,” claimed Circle. It also commented that the Bank of England (BoE)’s Digital Currency Project, dubbed “Britcoin” by some, could “weaken AML controls, tax compliance and other anti-crime measures”.

Appearing at a Treasury Committee inquiry in July, BoE governor Andrew Bailey was asked if the Bank was abandoning its Britcoin project. Bailey said its current focus was on tokenised deposits, adding if the project was successful, he would question “why we would need to introduce a new form of money”.