Why are Stripe and Circle competing to launch Layer 1 native chains?

Author: 0xWorkhorse, Compiled by: Shaw Golden Finance

In just a few days, two fintech giants announced that they would build their own Layer 1 blockchains, bypassing many existing solutions. First, Stripe launched Tempo—an EVM-compatible Layer 1 blockchain optimized for payments. Circle quickly followed suit, launching Arc, which is their own network focused on stablecoins and compatible with EVM.

Ethereum, Solana, and Avalanche, among other heavyweight projects, have provided strong scalability and mature developer tools. So why are these companies starting from scratch? From acquisitions, regulatory changes to industry reactions, there are four strategic drivers: control, value capture, compliance, and the trillion-dollar stablecoin opportunity.

To be honest, I think they could have utilized the existing tools—I've used quite a few myself. These solutions seem obvious to me, so whether we like or dislike this move, it's worth understanding why they did it. Is it purely for money, or are there deeper technical and logical considerations behind it?

Official Announcement: Tempo and Arc Enter the Layer 1 Field

To understand these measures, it might be useful to take a look at what Stripe and Circle have been quietly building—and why it is now.

Stripe's Tempo

On August 11, Stripe partnered with one of the most influential investment firms in the cryptocurrency space, Paradigm, to create Tempo, a high-performance L1 payment platform optimized for stablecoin infrastructure. Previously, Stripe acquired Bridge for $1.1 billion in October 2024 to gain stablecoin technology, and in June 2025, it acquired Privy to obtain wallet infrastructure, including account abstraction and fee-less transactions.

In my opinion, its development trajectory is clearly visible: Stripe is building a complete integrated payment system from wallets to settlement layers.

Circle's Arc

Just one day later, Circle announced the launch of Arc, while also announcing that its second-quarter revenue reached $658 million, and the circulation of USDC exceeded $65 billion. Arc is compatible with the Ethereum Virtual Machine (EVM), uses USDC as its native transaction fee token, and features a built-in stablecoin forex engine, sub-second settlement, optional privacy features, and direct integration with the Circle platform. A public testnet is expected to be launched this fall, and Arc will become a pillar for stablecoin payments, forex, and capital markets.

The launch of these two products occurred after the introduction of the "GENIUS Act" in July 2025, which clarified the rules for stablecoins in the United States and sparked a fintech arms race, with various parties competing to create compliant, enterprise-level blockchain payment systems.

Why Launch: Four Common Driving Forces

Theoretically, building an L2 network or expanding an existing chain is cheaper, faster, and carries lower risks. As mentioned above, the demand for Tempo and Arc is likely to be met.

However, Stripe and Circle have four motivations that existing payment channels may not fully meet.

1. Designed for stablecoins

The existing Layer 1 networks are general-purpose. Tempo and Arc are designed specifically for stablecoin settlement and payments. Stripe can directly embed Bridge's issuance tools and Privy's fee-free wallet technology into Tempo to achieve instant, low-cost large-scale transactions. Circle uses USDC as transaction fees and integrates a native foreign exchange engine, enabling real-time cross-currency settlement without relying on external oracles. As Circle CEO Jeremy Allaire said, this is to "accelerate people's interest in building on stablecoins" - while the universal chain cannot guarantee enterprise-level speed, uptime, and privacy without compromise.

2. Vertical Integration and Value Acquisition

Using a third-party chain means paying fees, enduring congestion, and being subject to governance decisions that you cannot control. By having a foundational layer, Stripe can fine-tune the consensus mechanism, block time, and fees based on its merchant transaction volume, and may potentially introduce token economics or exclusive merchant privileges. At the same time, Circle can ensure that Arc is fully compatible with its platform while deriving more value from the dominant position of USDC.

3. Compliance, Security, and Regulatory Flexibility

After the introduction of the "GENIUS Act", stablecoins are facing higher compliance requirements. Tempo and Arc can integrate KYC, privacy controls, and auditable settlement processes from the very beginning – this is much easier than retrofitting these features onto a decentralized public blockchain.

Stripe's private ownership means it can iterate without shareholder opposition; Circle can align Arc's governance with its regulated status. That said, Avalanche has just addressed these needs by launching eERC, a token standard that focuses on privacy and complies with institutional regulatory requirements.

4. Innovation Beyond Current Limitations

Both companies are able to develop the unoptimized functions of a universal L1 network:

• Tempo: Instant merchant settlement, streaming micropayments, and revenue balance combined with fiat currency.
• Arc: Autonomous privacy protection for capital markets, native foreign exchange tools, programmable settlement.

These features will create a platform effect - Tempo may become the default choice for Stripe merchants; Arc may become the preferred application supported by USDC.

This is a "billion-dollar opportunity" valued at the L1 level.

Summary

If Tempo and Arc succeed, this transformation will be significant. Faster and cheaper payment methods may divert business from payment card networks, small payments and real-time foreign exchange trading could become mainstream, and stablecoin-native Layer 1 protocols may consolidate market share—even as the overall fragmentation of Layer 1 networks continues.

From an industry health perspective, I am not very optimistic about this initiative, but I also understand that the industry will only become more efficient over time. Ideally, this efficiency should be driven by the existing and emerging participants that we have supported for many years—but we cannot always determine who will prevail.

The skepticism in the cryptocurrency community is justified, and I share that skepticism - but I also understand that for newly joined institutions, the scale of opportunity is enormous, and they seize every opportunity - that's their way of doing things.

For Stripe and Circle, these are not superfluous actions but a meticulously crafted layout aimed at taking control of the future of digital payments.