The New Battlefield for Stablecoins: The Layer 1 Competition Between Stripe and Circle

The L1 vs L2 Debate

First, let's answer the most straightforward question: why not learn from Coinbase (Base) or plan your own L2 like Robinhood?

If your advantage lies in distribution, in "one-click migration" of a massive existing user base and merchants onto the chain, then L2 is the most straightforward solution.

Inheriting Ethereum's security and tool ecosystem, launching quickly, and also gaining the benefits of sequencer economics.

The rise of Base is not technically stunning; the key lies in Coinbase's traffic entry and application integration. This methodology has already been validated.

So why are Stripe and Circle both talking about L1?

Because "payment chains" are becoming an independent track.

A group of L1s centered around Tether (Stable and Plasma) is pushing a narrative: stablecoins need a native, payment-oriented layer—stablecoins as gas, predictable fees, sub-second settlement—rather than always being "guests" residing on general-purpose public chains.

The pressure on Circle is evident: if competitors' dollar stablecoins start binding their own settlement layers, USDC cannot forever be just "a token"; it must also become "that railway."

Interpreting Circle

Zooming in, Circle's actions are not simply "defensive."

Arc and the Circle Payments Network (CPN) are working in the same direction, more like moving Visa's "network of networks" strategy onto the chain.

Open, EVM-compatible, USDC native, aimed at payments and foreign exchange, also preparing for capital market scenarios.

Its core lies in a strategic concession: if Circle chooses to give more front-end revenue to issuance/distribution partners, taking only a thin network-level fee in return for stronger network externalities.

This was precisely the winning strategy of card organizations back in the day: lower fees, first gain adoption, win trust, and lay down endpoints.

In this light, "Arc vs Stable/Plasma" is more critical than "Circle vs Coinbase."

If Tether's payment chain establishes "stablecoin native + low-friction payment experience" as the industry standard, Circle cannot just be a bridge to others' railways; it must have a truly reliable track of its own.

At the same time, openness is not just a slogan: the distribution and thresholds of notarization nodes, the public nature of developer tools, and the ease of cross-chain and exit determine whether Arc is "public infrastructure" or just a rebranded proprietary channel.

Otherwise, it will fall into the vicious cycle of "decentralization—scaling—re-centralization."

Interpreting Stripe

Returning to Stripe, whether Tempo is suitable as L1 depends on whether it is "truly open."

If Tempo is fully public, minimally permissive, EVM-compatible, and natively interoperable, Stripe can turn its distribution power into a cold-start engine for a public network.

It's not about building a "merchant garden," but about lighting up a public road that is fair to all participants.

Conversely, if governance, validation, and bridging are closely tied to Stripe itself, the ecosystem will quickly raise concerns about dependency risks: what is a convenient "shortcut" today may become an unavoidable "toll booth" tomorrow.

Visa has long provided the industry with a textbook: to establish universal trust, you must first achieve interoperability to create brand value.

Therefore, the judgment of "who should do L1, who is more suitable for L2" corresponds directly to business models.

For issuers like Circle, moving to the network layer is inherently reasonable.

USDC as gas, optional privacy, deterministic settlement, and built-in FX are attractive for cross-border B2B, platform merchants, and certain capital market workflows; competitive pressure also forces it to quickly convert "scale" into "network power."

For PSPs like Stripe, having already grasped the "last mile," L2 is often the better solution.

Carrying less governance and security burden of L1, while enjoying the composability and developer goodwill of L2; unless Tempo writes "openness" into its systems and technologies from day one.

Offense vs Defense

There is a popular judgment in the market regarding the L1s of the two companies: Stripe is on the offense, while Circle is on the defense.

This judgment is intuitively correct but not complete.

Stripe can indeed leverage its distribution advantage to compress cold-start costs and light up demand with a single command; Circle indeed does not control the end-user, with activities scattered across multiple chains and partners.

But if we view Arc + CPN as the on-chain version of the "Visa methodology," Circle is more like rewriting the game rules with a network strategy.

Commoditizing the peripheral elements and standardizing the core settlement layer.

Even if a large portion of front-end revenue is given to issuers, exchanges, or PSPs, it must yield a larger network surface.

In this way, it does not need to chase the volume of Base but rather redefine its own chessboard.

The real systemic risk is "fragmentation disguised as progress."

If every large company builds a "semi-open" payment chain, we will return to the era of private networks before the internet.

Barely interoperable through adapters, with high costs and poor resilience.

The criteria should not be TPS, but rather: is it reliably open; is it easy to exit; is it equally friendly to "non-partners"?

The ability to scale without sacrificing protocol openness is the essence of breaking free from the vicious cycle of "decentralization—scaling—re-centralization."

In terms of execution, here are a few "hard indicators" recommended for both companies.

For Circle: pull up the public test network on schedule; refine the process of "USDC as gas" to serve real merchants to the point where no training is needed; publish transparent, externally participatory validation node standards; ensure CPN clearly maintains a multi-chain principle to avoid shortsighted incentives that "redirect traffic to its own chain."

For Stripe: either pivot to L2 like Celo, or push Tempo's openness to the extreme: introduce external validators early, open-source the client and key modules, decouple chain-level governance from the company organization, and treat "network of networks" as a fundamental principle rather than a marketing slogan.

Distribution still determines speed, but it cannot come at the expense of protocol commons.

Conclusion

This is not a battle of speed versus functionality, but a re-selection between "open protocols" and "brand railways."

Circle's path resembles an "offensive" cloaked in "defense"; if Stripe wants to do L1, it must make openness a structural commitment, or the smartest developers will vote with their feet.

What truly matters is not who shouts the highest TPS first, but who can establish universal trust across entities while maintaining composability.

This is the correct answer to "scaling without sacrificing protocol openness."