Circle Raises $222M for Arc Blockchain, Highlighting Regulatory Gaps

Written by Zennon Kapron

Compiled by AididiaoJP, Foresight News

Circle has raised $222 million for its proprietary Layer-1 blockchain, Arc. A stablecoin issuer also owning the infrastructure its USDC settlements rely on is precisely the conflict of interest the GENIUS Act never addressed.

Over the past two years, Circle has positioned itself as a responsible stablecoin issuer—proactively seeking regulation, embracing rules, and preferring to be a dull but fully reserved issuer of U.S. dollars rather than a crypto speculative venture. This positioning made sense when Circle was solely an issuer. But now, the company is shifting into an entirely new role that rekindles conflicts of interest that financial regulators typically strive to avoid.

On May 11, 2026, Circle announced it had completed a $222 million token presale for its proprietary Layer-1 blockchain, Arc, with a fully diluted valuation of approximately $3 billion. The lead investor was Andreessen Horowitz (a16z), with participation from institutions including BlackRock, Apollo, and Intercontinental Exchange, the parent company of the New York Stock Exchange. This marked the first time a publicly traded company conducted a token presale, and the scale of funding underscores Circle’s commitment to the project.

Arc is Circle’s core bet. Launched in 2025, the project is positioned as a native stablecoin blockchain, with USDC serving as the native asset for paying transaction fees. The public testnet has already been completed. Circle’s CEO stated that the company is exploring the issuance of a native Arc token and a transition to a proof-of-stake (PoS) validation mechanism.

Circle is no longer content with just issuing USD; it wants to own the blockchain on which USD operates, rather than letting its USD flow on infrastructure controlled by other companies.

Traditional finance strictly separates the issuer of financial instruments from the clearing and settlement infrastructure. The clearing system must remain neutral and fairly order transactions for all participants, applying identical rules to the issuer and its competitors.

When the issuer also controls the settlement layer, this neutrality becomes merely a promise with no structural enforcement. Arc gives Circle control over transaction ordering, validation, and rule-making for the network on which its product competes.

If a competitor’s stablecoin wants to settle on Arc, it must operate on infrastructure owned by its direct competitor. Circle can set fees, prioritize transactions, define technical standards, and adjust network rules to favor USDC, and owning the chain itself does not compel it to exercise restraint.

The issue here is not about predicting that Circle will abuse its power, but rather that this power should never have been granted to a stablecoin issuer in the first place, because it creates a structural and permanent temptation.

This is a legal gap. The GENIUS Act, signed in July 2025, aims to make stablecoins safe as a payment instrument. It specifies the reserves that payment stablecoins must hold, disclosure requirements, issuer oversight mechanisms, and holder protections. As a regulatory framework for issuers, it is detailed and cautious within its own scope.

But at the level of market structure, it remains almost entirely silent. The drafters focused solely on the "coin" itself—whether the dollar token is truly worth one dollar and whether it is truly redeemable. They did not consider that the issuer might simultaneously own and operate its underlying settlement network, as no major issuer did so in 2025.

Circle has now entered the legal gray area left behind. The GENIUS Act regulates U.S. dollars in user wallets, yet says nothing about a company that owns wallets, rails, and dollars simultaneously.

Look at Arc’s list of investors: BlackRock is the world’s largest asset manager and the custodian of USDC reserves; Apollo is a major private credit firm; Intercontinental Exchange owns the New York Stock Exchange. These institutions are the builders and operators of market infrastructure themselves—they invested not to bet on token prices.

They are investing in infrastructure that will become the core financial pipeline—a settlement network for tokenized U.S. dollars, with future expansion to tokenized funds and securities. Arc is being built and capitalized as infrastructure, and the company controlling this platform is precisely the one whose stablecoin is meant to flow across it as a neutral currency.

This strategy has a clear defensive logic. USDC must compete with Tether’s USDT, which has more than twice its market size, while also facing an increasing number of stablecoins launched by banks and payment companies.

As a mere issuer, you can only survive on the reserve spread, which constitutes your entire business—this position is both fragile and vulnerable to attack. Every serious competitor is now trying to escape this predicament by controlling more segments of the value chain.

Stripe is building its own blockchain, and Tether is expanding its infrastructure and distribution channels. If Circle continues to operate solely as an issuer while its competitors evolve into platforms, it will be left in the weakest position. Arc is Circle’s attempt to shift from “selling products” to “operating a platform”—a model with greater and more sustainable profit potential.

The same logic is precisely why regulators need to establish rules: other major issuers have the same incentive to follow Circle in building their own "railroads."

Structural conflicts require structural responses, and financial regulation already has established models. Exchanges are subject to rules ensuring fair access and non-discrimination, while clearinghouses have governance requirements to ensure they do not favor any single member. The core principle is: infrastructure that everyone must use cannot be controlled in a way that favors any one user.

Applied to Arc, this means the network itself must assume obligations, not just stablecoins:

• Trade ordering must remain provably neutral between USDC and competing stablecoins;
• Fee schedules must be publicly disclosed and standardized;
• The governance of the chain must be separated, in an auditable manner, from Circle’s commercial interests in the USDC market share.

These are not novel requirements but standard tools in regulated market infrastructure. The only reason they haven’t been applied is that the laws were enacted before issuers became infrastructure.

The EU’s MiCA regulation also provides a contrast: like the GENIUS Act, it focuses on issuers and reserves, and neither includes a market structure section addressing the scenario where the issuer operates the settlement network simultaneously. Now, while Arc is still in the testnet phase,即将转为主网, adding this section carries the lowest cost; once it becomes the pipeline upon which the tokenized dollar economy depends, making changes will be far more expensive.

The first conflict contains a second conflict within it, and the list of investors directly points to it: BlackRock manages the reserves behind USDC and is also an investor in Arc. The reserve manager, issuer, and settlement chain are now connected through overlapping business interests.

Each individual relationship may be valid, but together they describe a highly concentrated cluster of companies with mutual investments, positioned at the center of what should be a neutral dollar infrastructure.

This concentration is precisely what market structure rules need to examine. Regulators should not be asking whether these institutions are reputable (they clearly are), but whether the tokenized dollar system should be allowed to form around such a small group before anyone determines the neutral obligations of core venues.

Regulators should be alert to the timeline. Arc achieved its announcement, public testnet launch, and completion of funding in just about a year. Circle has clearly stated its intention to launch the mainnet and transition to PoS validation.

Once this type of infrastructure carries real value, it becomes extremely difficult to reshape—because the cost of changing rules is passed on to all institutions built on top of it. Settlement networks accumulate integration, liquidity, and dependent applications; each additional layer increases the switching cost of any subsequent intervention.

The optimal time to establish the neutral obligation of stablecoin issuer chains is now—Arc is still in its pre-mainnet phase, where rule changes affect only design documents, not an operational system. Once Arc handles institutional-grade transaction volumes, regulators demanding that Circle separate its chain governance from its USDC business interests would amount to ordering the reconstruction of live infrastructure—an endeavor that is slow, costly, and met with fierce resistance.

Circle's actions are not irrational. Operating with the same full-stack logic as companies like Stripe, this is the right move from a shareholder perspective—because profits flow to those who control the infrastructure, while pure issuers are merely thin businesses resting on others' railroads.

The strategy serving Circle’s shareholders is precisely what regulators should examine now, before it becomes entrenched. Preventing structural conflicts is low-cost; dismantling them afterward is expensive.

The issue is not complicated: Can a regulated stablecoin issuer own a settlement network that competitors must use? If so, what neutrality obligations must that network uphold?

The GENIUS Act does not address either of these issues, because they won't require answers until 2025. But in 2026, they will—and Circle is precisely why.