Ethereum About to Be Abandoned? Stablecoin L1 Revolution: The “On-Chain Sovereignty” Battle Between Circle and Stripe
In the past two days, a certain narrative has been circulating in the market: “Ethereum’s position as a settlement layer is no longer stable”, “Ethereum is being abandoned by corporate giants.” Such opinions are becoming more common. Of course, these are highly one-sided takes — but why are they emerging? To understand that, we have to start with two announcements from Circle and Stripe.
Over the past few years, stablecoins have gradually moved from being a “supporting role” in the crypto world to center stage. Whether in DeFi, cross-border payments, or RWA (real-world assets), stablecoins have become the core medium connecting on-chain and off-chain capital. Now, this trend has reached a new turning point — fintech giants are no longer satisfied with just using stablecoins; they are beginning to build blockchains specifically tailored for them.
What’s more striking is that Circle and Stripe almost simultaneously unveiled major plans:
Circle announced the launch of Arc, an open Layer-1 blockchain specifically designed for stablecoin financial use cases, with USDC as its native gas.
Stripe, in collaboration with well-known crypto venture firm Paradigm, is secretly developing a high-performance payment-focused public chain called Tempo, also EVM-compatible, targeting global payments and cross-border settlements.
The emergence of these two chains marks the official formation of the “stablecoin L1” niche track — and raises an unavoidable question: is this the beginning of the next public chain competition, or a long-term threat to existing settlement layers like Ethereum?
From Using to Building: Why Are Giants Suddenly Launching Their Own Chains?
On the surface, the reason for Circle and Stripe to build their own chains seems straightforward — to control the core settlement layer. But looking deeper, there are actually three key driving forces behind it:
- The Cost–Profit Trade-off
Take Circle as an example. In fiscal Q2 2025, USDC’s circulation soared 90% year-over-year to $61.3 billion, and in August it rose further to $65 billion. USDC circulates across multiple chains such as Ethereum and Solana, meaning that every transfer, distribution, and settlement by Circle is subject to third-party network gas fees and performance bottlenecks.
Financial reports show that Circle’s distribution costs surged 64% year-over-year to $407 million — directly squeezing profit margins. By using USDC as the native gas on Arc and integrating it directly into Circle’s own payment and settlement systems, external dependency can be greatly reduced and distribution costs saved.
- Security in the Business Model
For payment companies, the settlement layer is their lifeline. If the chain belongs to someone else, then the core infrastructure’s security, upgrade pace, and fee model cannot be fully controlled. Any congestion, upgrade delays, or fee spikes on a third-party chain could impact business experience and merchant trust.
Building their own chain is essentially a strategic “de-dependency” move — keeping the lifeblood firmly in their own hands.
- Balancing Performance and Compliance
Existing public chains are often designed to maximize decentralization, which means performance and compliance features may not be the top priority. But in the payment sector, merchants and institutions care most about low latency, high throughput, predictable confirmation times, as well as privacy and regulatory interfaces.
Arc’s sub-second settlement, optional privacy features, and Tempo’s high-performance payment optimization happen to match exactly these needs.
Arc and Tempo: The “Twin Stars” of Stablecoin Public Chains
Although Arc and Tempo have different positioning, they share many similarities under the hood — reflecting the core features of stablecoin L1s.
Arc: Circle’s Dedicated Stablecoin Financial Chain
Native Gas: USDC — users and institutions don’t need to hold volatile crypto assets to pay fees, lowering the usage barrier.
Built-in Forex Engine — supports 24/7 auto-settlement and price discovery between stablecoins, ideal for cross-border payments and FX derivatives.
Malachite High-Performance Consensus — sub-second instant finality, meeting high-frequency settlement needs.
Optional Privacy — balancing compliance with commercial data protection.
EVM Compatibility — lowers migration costs for developers and helps attract the existing Ethereum ecosystem.
Arc’s core logic is straightforward: not to become a “general-purpose public chain,” but to fully connect all payment, settlement, credit, and capital market scenarios where stablecoins can be applied.Tempo: Stripe’s High-Performance Payment Chain
Positioning: Targeting global merchant payments and cross-border settlements.
Team Size: Only five people, still in stealth mode, co-developed with Paradigm.
EVM Compatibility: Again, aiming to lower the barrier for developer migration.
Strategic Background: Stripe previously acquired stablecoin infrastructure company Bridge ($1.1 billion) and crypto wallet developer Privy; Tempo will serve as the base layer of its stablecoin ecosystem.
Tempo’s strategic path is closer to an “upgraded payment network,” focusing on embedding stablecoins directly into Stripe’s global payment system — so merchants and users can switch to on-chain settlement seamlessly.
Is Ethereum’s “Settlement Layer” Throne Really in Danger? Why This View Is One-Sided
This is the question everyone cares about: once the giants have their own chains, will Ethereum be marginalized?
In the Short Term: Little Conflict
Arc and Tempo are highly verticalized designs for payment and settlement scenarios. They are not aiming for maximum decentralization or a rich DeFi/NFT/GameFi ecosystem. They won’t directly compete for DeFi trading volume, NFT minting, or GameFi markets.
More importantly, giant-built chains will generally maintain EVM compatibility and connect to Ethereum via cross-chain bridges — giving Ethereum the opportunity to remain their settlement backup layer.In the Long Term: Structural Threat
The risk lies in the migration of stablecoin settlement volume. Currently, a large share of USDC transactions happen on Ethereum and its L2s. If Arc enables USDC to run natively and seamlessly integrates with payment apps via API, merchants and users might bypass Ethereum altogether.
Similarly, if Stripe uses Tempo to embed on-chain payment functions directly into global merchant backends, developers might prefer to build compliant applications on these proprietary chains rather than adapting to Ethereum.
This trend could erode Ethereum’s market share in the stablecoin settlement and RWA tracks, affecting its long-term narrative and valuation in the capital markets.
Opportunities and Shifts: Not a Zero-Sum Game
While there is a threat, this doesn’t necessarily mean zero-sum competition. Historically, every infrastructure upgrade has brought new forms of collaboration. The EVM compatibility and openness of giant-built chains could allow them to capture volume in the payment layer, while leaving complex asset management and liquidity aggregation to Ethereum. In other words, Ethereum could evolve into a value aggregation layer, handling high-value settlements and asset custody from proprietary chains.
Moreover, the success of Arc and Tempo could also educate and attract larger-scale traditional institutions into the stablecoin ecosystem — a net positive for the crypto industry. More fiat and asset tokenization would expand the overall liquidity pool and application scope of the sector.
Takeaways for Investors and Developers
For Investors: In the short term, giant-built chains won’t immediately disrupt Ethereum’s price structure, but in the medium to long term, watch the distribution of core stablecoins like USDC across chains. The stablecoin payment infrastructure, compliant cross-border settlement, and on-chain FX sectors may be up for valuation re-rating.
For Developers: Payment applications and compliant financial products will likely have greater opportunities on Arc and Tempo, since their target users are institutions and merchants. Keep an eye on their openness, cross-chain capabilities, and developer incentive programs to decide if migration is worthwhile.
Conclusion: Stablecoin L1s Could Be the Next Super Track
Stablecoins are essentially the “highways” connecting on-chain and off-chain finance, and Arc and Tempo are building dedicated express lanes for them. For the giants, this is a race to control on-chain sovereignty; for the industry, it’s a new wave of infrastructure upgrades driven by stablecoins.
Whether Ethereum’s “global settlement layer” narrative will be shaken remains to be seen. But one thing is certain: in the coming years, the competition in stablecoin public chains won’t be limited to Circle and Stripe — more financial institutions, payment companies, and even large banks are likely to join the fray.
The stablecoin story is only just beginning.
