Why Stripe and Circle Are Launching Their Own L1s Instead of Using Existing Infrastructure
Control, value capture, compliance, and a trillion-dollar stablecoin opportunity.
In the span of just days, two fintech giants announced that they will be building their own L1s, bypassing a vast menu of existing options. First came @Stripe, with Tempo -- a payments-optimized, EVM-compatible Layer 1 (L1) blockchain (Fortune). Then @Circle followed with Arc, their own stablecoin-focused EVM-compatible network (The Block).
Since these announcements, my timeline has been in shambles:
With heavyweights like Ethereum, Solana, and Avalanche already offering robust scalability and mature developer tools, why are these companies choosing to build from scratch? Reading the tea leaves -- from acquisitions and regulatory shifts to industry reactions -- points to four strategic drivers: control, value capture, compliance, and a trillion-dollar stablecoin opportunity.
I’ll be honest: I think they could have used existing tools -- I’ve used plenty myself. The solutions seem like no-brainers to me, so whether we love or hate the move, it’s worth understanding why they made it. Is it purely about money, or is there a deeper technological and logistical play here?
There is a lot to unpack here and I've gone deep, so stick with me.
First, let's do some table setting.
The Announcements: Tempo and Arc Enter the Arena
To understand these moves, it helps to look at what Stripe and Circle have been quietly building -- and why now.
Stripe’s Tempo
On August 11, 2025, Fortune reported Stripe’s partnership with Paradigm -- one of crypto’s most influential investment firms -- to build Tempo, a high-performance L1 optimized for stablecoin infrastructure. This follows Stripe’s $1.1 billion acquisition of Bridge in October 2024 for stablecoin tech, and its June 2025 purchase of Privy for wallet infrastructure, including account abstraction and gasless transactions.
To me, the trajectory is clear: Stripe is assembling a fully integrated payment stack from wallet to settlement layer.
Circle’s Arc
Just one day later, on August 12, 2025, Circle announced Arc alongside $658 million in Q2 revenue and USDC circulation topping $65 billion. Arc is EVM-compatible, uses $USDC as its native gas token, and bakes in a stablecoin FX (Foreign Exchange) engine, sub-second settlement, opt-in privacy, and direct integration with Circle’s platform. A public testnet is expected this Fall, positioning Arc to become the backbone for stablecoin payments, FX, and capital markets.
Both launches arrive in the wake of the GENIUS Act in July 2025, which clarified U.S. stablecoin rules and have since ignited a fintech arms race to own the rails for compliant, enterprise-grade blockchain payments.
Why Build? Four Shared Drivers
On paper, building an L2 or extending an existing chain would be cheaper, faster, and far less risky. Above, you can see that the needs of both Tempo and Arc can likely be met.
But Stripe and Circle share four motivations that existing rails might not be able to fully deliver.
1.) Purpose-Built for Stablecoins
Existing L1s are general-purpose. Tempo and Arc are designed from the ground up for stablecoin settlement and payments. Stripe can embed Bridge’s issuance tools and Privy’s gasless wallet tech directly into Tempo for instant, low-cost transactions at massive scale. Circle uses USDC for gas and integrates a native FX engine, enabling real-time cross-currency settlement without relying on external oracles.
As Circle CEO Jeremy Allaire put it, this is about “accelerating interest in building on stablecoins” -- and generic chains can’t guarantee enterprise-grade speed, uptime, and privacy without compromises.
2.) Vertical Integration and Value Capture
Using third-party chains means paying fees, inheriting congestion, and being subject to governance decisions you don’t control.
By owning the base layer Stripe can fine-tune consensus, block times, and fees for its merchant volume -- and potentially introduce tokenomics or exclusive merchant perks.
Meanwhile, Circle can ensure Arc is fully interoperable with its platform while capturing more value from USDC’s dominance.
3.) Compliance, Security, and Regulatory Agility
Post-GENIUS Act, stablecoins face heightened compliance requirements. Tempo and Arc can bake in KYC, privacy controls, and auditable settlement flows from day one -- far easier than retrofitting these features onto decentralized public chains.
Stripe’s private ownership means it can iterate without shareholder pushback; Circle can align Arc’s governance with its regulated status.
That being said, Avalanche just addressed these needs with the launch of eERC, a privacy-focused and institutional compliant token standard. So, shrug, I guess.
4.) Innovation Beyond Off-the-Shelf Limits
Both companies can build features that generic L1s aren’t optimized for:
Tempo: Instant merchant settlement, streaming micropayments, yield-bearing balances integrated with fiat rails.
Arc: Opt-in privacy for capital markets, native FX tools, programmable settlement.
These features create platform effects -- Tempo can become the default for Stripe’s merchants; Arc can be the go-to for USDC-powered apps.
As @0xMert_ noted, this is a "billion-dollar shot" at L1-level valuations.
Tying It All Together
If Tempo and Arc succeed, the shift could be significant. Faster, cheaper rails could siphon volume from card networks, micropayments and real-time FX could go mainstream, and stablecoin-native L1s could consolidate market share -- even as overall L1 fragmentation continues.
As of this writing, I am not a big fan of this move from an industry health perspective, but I also understand that this industry will only grow more efficient over time. Ideally, that efficiency is driven by the existing and already establishing players that we've all supported for years -- but we can't always choose who wins.
The crypto community’s skepticism is warranted and I share that skepticism -- but I also understand that the scale of the opportunity is massive for incoming institutions, so they're going to reach for that brass ring every time -- it's what they do.
For Stripe and Circle, these aren’t redundant projects -- they’re calculated plays to own the future of digital payments.