Arc's Euro Stablecoin Growth May Be More Circle Stockpiling Than Actual Adoption

Circle's new blockchain, Arc, has been a hotbed of euro stablecoin growth since its public launch on September 16. According to Token Terminal data, Arc added $6.2 million in euro stablecoins over the past 30 days, making it the second-largest contributor to this growth.

This may seem impressive at first glance, but the numbers tell a different story. When adjusted for their starting position, Ethereum accounts for about 80% of the combined increase, Arc for around 16%, and Base for just 4%. The total euro stablecoin supply has increased by less than 5% in this period.

The reason for this disparity lies in Circle's control over both ends of the supply chain. As the issuer of EURC, the largest euro stablecoin, Circle can deploy its own stablecoins on Arc at will. This means that a significant portion of Arc's $6.2 million increase is likely due to Circle stocking its own shelf rather than actual adoption.

Aave V4, which went live on Arc on September 16 with EURC among its initial reserves, provides another example of the gap between deposits and use. While $76 million in USDC was deposited into the market within a day of launch, less than $100,000 had been borrowed by September 17, leaving utilisation at around 0.1%.

The real test for Arc's euro liquidity lies not in its supply figures but in demand-side metrics such as EURC transfer volume between addresses that do not belong to Circle or its market makers, trading volume in EURC pairs on StableFX and Arc's DEXs, borrowing and utilisation of EURC on Aave V4, and settlement activity from the payment companies and banks named at launch.