Circle, the issuer of the $65 billion USDC stablecoin, has unveiled Arc, its own Ethereum-compatible blockchain. A key differentiator is the blockchain’s gas fees will be paid in USDC rather than a cryptocurrency with a volatile price. This marks Circle’s latest vertical integration step. It launched a wallet solution some time back, and recently unveiled the Circle Payments Network that integrates stablecoin payments with off ramps and foreign exchange (FX) liquidity.
The blockchain network targets the massive foreign exchange market with its built-in FX engine – a request for quote (RFQ) system for price discovery. But it’s not just spot markets that are of interest. For traditional over the counter derivatives markets, FX is the second largest type of market after interest rates, with almost $5 trillion in notional value outstanding in June 2024 (according to the BIS). Circle’s Arc will support on chain perpetual futures for foreign exchange using stablecoin pairs.
Beyond FX capabilities, the stablecoin firm is also squarely aiming to meet several traditional finance requirements, such as fast transaction finality and optional privacy for both balances and transactions. Sub-second finality is enabled through the Malachite consensus mechanism, with the development team of the open source software joining Circle and the software coming under Circle’s stewardship.
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