The New Battlefield for Stablecoins: Stripe vs. Circle's Layer 1
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The New Battlefield for Stablecoins: Stripe vs. Circle's Layer 1
This is not a debate about speed and functionality, but rather a re-choice between "open protocols" and "branded rails."
Navigating Web3 tides with focused insightsAuthor: Charlie
Two stablecoin Layer 1s announced in one day shook the entire crypto and fintech world.
Stripe's "Tempo" emerged from stealth mode, while Circle officially unveiled "Arc" during its earnings cycle.
On the surface, both are public chains optimized for payments.
But their underlying logic is entirely different: one is a payment provider with access to merchants and developer distribution; the other is the issuer of USDC, attempting to upgrade a single stablecoin into an entire network.
L1 vs L2 Debate
Let’s first answer the most straightforward question: Why not follow Coinbase (Base), or plan your own L2 like Robinhood?
If your strength lies in distribution—moving massive existing users and merchants “one-click” on-chain—then an L2 is the most natural solution.
Inherit Ethereum’s security and tooling ecosystem, launch quickly, and capture sequencing economics as a bonus.
Base’s rise wasn’t due to impressive tech, but rather Coinbase’s traffic gateway and app integration. This playbook has already been proven.
So why are Stripe and Circle both talking about L1?
Because “payment chains” are becoming a category of their own.
A group of L1s centered around Tether (Stable and Plasma) are advancing a narrative: stablecoins need a native, payment-optimized base layer—using stablecoins as gas, predictable fees, sub-second settlement—not forever remain “guests” on general-purpose blockchains.
The pressure on Circle is clear: if rival dollar stablecoins begin binding themselves to proprietary settlement layers, USDC can’t remain just “a token”—it must also become “the railway track.”
Understanding Circle
Zooming in, Circle’s move isn’t merely defensive.
Arc working in tandem with Circle Payments Network (CPN) resembles taking Visa’s “network of networks” strategy onto the blockchain.
Open, EVM-compatible, USDC-native, built for payments and foreign exchange, and preparing for capital markets use cases.
Its core lies in strategic compromise: if Circle gives up more front-end revenue to issuing/distribution partners, keeping only thin network-level fees, it gains stronger network externalities.
This mirrors how card networks won: lower cuts, wider adoption, earned trust, expanded endpoints.
From this angle, “Arc vs Stable/Plasma” matters more than “Circle vs Coinbase.”
If Tether-aligned payment chains establish “stablecoin-native + low-friction payments” as the industry standard, Circle cannot just be a bridge to someone else’s rails—it needs its own track that others can genuinely rely on.
Meanwhile, openness isn’t just rhetoric: the distribution and threshold of validating nodes, the public availability of developer tools, ease of cross-chain interoperability and exit—all determine whether Arc becomes “public infrastructure” or just a rebranded proprietary channel.
Otherwise, it falls into the vicious cycle of “decentralization → scaling → re-centralization.”
Understanding Stripe
Back to Stripe: whether Tempo is suitable as an L1 depends entirely on whether it’s “truly open.”
If Tempo is fully public, minimally permissioned, EVM-compatible, and natively interoperable, Stripe could leverage its distribution power to kickstart a public network.
Not building a “merchant garden,” but lighting up a fair public road for all participants.
Conversely, if governance, validation, and bridging tightly revolve around Stripe itself, the ecosystem will soon face dependency risks: today’s “shortcut” could become tomorrow’s unavoidable “toll booth.”
Visa already provided the textbook: to build universal trust, prioritize interoperability first—then brand value follows.
Therefore, the judgment of “who should build L1, who fits better on L2” maps directly to business models.
For issuers like Circle, moving toward the network layer makes intrinsic sense.
USDC as gas, optional privacy, deterministic settlement, built-in FX—these features appeal to cross-border B2B, platform merchants, and certain capital market workflows. Competitive time pressure also forces Circle to rapidly convert “scale” into “network power.”
For PSPs like Stripe, which already control the “last mile,” L2 is often the superior choice.
Less burden managing L1 governance and security, more composability and goodwill from developers—unless Tempo embeds “openness” into its institutions and technology from day one.
Offense vs Defense
There’s a popular take on these two L1s: Stripe plays offense, Circle plays defense.
The intuition is correct, but incomplete.
Stripe indeed leverages distribution advantages to compress cold-start costs—demand lights up at command. Circle lacks end-user touchpoints, its activity scattered across multiple chains and partners.
Yet viewing Arc + CPN as the on-chain version of the “Visa methodology,” Circle appears to be rewriting the rules via network strategy.
Commoditize peripheral components, standardize the core settlement layer.
Even if front-end revenue flows to issuers, exchanges, or PSPs, Circle prioritizes broader network reach.
In doing so, it doesn’t need to chase Base’s volume—it redefines its own game board.
The real systemic risk is “fragmentation disguised as progress.”
If every major company builds a “semi-open” payment chain, we return to the pre-internet era of private networks.
Clunky adapters for limited interoperability, high cost, low resilience.
The benchmark shouldn’t be TPS, but: Is it credibly open? Easy to exit? Equally welcoming to non-partners?
The key to escaping the “decentralization → scaling → re-centralization” trap lies in scaling without sacrificing protocol openness.
At the execution level, here are some “hard metrics” for each.
For Circle: launch the testnet on schedule; streamline the “USDC as gas” process for real merchants until it’s intuitive and requires no training; publish transparent, externally verifiable validator node standards; ensure CPN firmly maintains a multi-chain principle, avoiding short-term incentives that subtly divert traffic to its own chain.
For Stripe: either pivot to become an L2 like Celo, or push Tempo’s openness to the extreme—introduce external validators early, open-source clients and critical modules, decouple chain governance from corporate structure, and treat “network of networks” as foundational principle, not marketing slogan.
Distribution still determines speed, but never at the expense of the protocol commons.
Conclusion
This isn’t a race of speed or features, but a renewed choice between “open protocols” and “branded rails.”
Circle’s path resembles an “offensive” play disguised as “defense”; Stripe, if building an L1, must make openness a structural commitment—or the smartest developers will vote with their feet.
What truly matters isn’t who shouts higher TPS first, but who can build universal trust across entities while preserving composability.
That is the right answer to “scaling without sacrificing protocol openness.”
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